PQ magazine, May 2021 by PQ magazine

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May 2021

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Latest ACCA pass rates inside

MAJOR OVERHAUL FOR AUDIT REGIME

Plans to reduce the dominance of the Big 4 accountancy firms and the creation of a new industry regulator came a step closer as the government unveiled a major overhaul of the UK’s audit regime. The proposals, set out in a new white paper, are designed to improve regulatory standards after the high-profile corporate failures such as BHS and Thomas Cook. On top of big changes in audit, company directors will face fines and bonus clawbacks if accounts are found to be misleading. Minister for Corporate Responsibility Lord Callanan said: “Audit failure isn’t an abstract problem; it has real-life consequences. Thousands of jobs have been lost in the wake of collapses like Carillion, and many more lives impacted, while wider confidence in big business is undermined.” He went on: “Auditors and rogue directors who have been asleep at the wheel must be held accountable. So, as part of our

plans, we will look to ensure the new regulator is fully equipped to take action where serious lapses have occurred.” If approved, large companies would be required to use a smaller

‘challenger’ firm to conduct a meaningful portion of their annual audit, watering down the supremacy of big-name auditors. The Big 4 could also face a cap on their market share of FTSE 350

audits if competition in the sector does not improve. A new regulator, the Audit, Reporting and Governance Authority (ARGA), which could oversee the largest unlisted companies as well as those on the stock market, will also have the power to impose an operational split between the audit and nonaudit functions of accountancy firms. Sir Jon Thompson, CEO of the FRC, said: “I welcome today’s publication as a significant milestone towards setting up a new, robust and independent regulator, which has the necessary powers to deliver its objectives, and on the ambitions set out in the three independent reviews.” The UK government also wants to encourage audit and assurance professionals to work towards a new audit profession, rather than remain a subset of the accountancy profession. When it comes to the audit itself, new reporting obligations Contuinued on page 4

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May 2021

IN THIS ISSUE A note from the Editor Although they are later in the calendar than usual the PQ magazine Awards 2021 are looming large. Please join us on Thursday 29 April, everyone is welcome. We kick off at 7pm. We would like to thank all our sponsors who stood by us in these difficult times, and you can see the shortlists on page 16. To join the party, sign up at https://tinyurl.com/n9yvdsp6 We love having a ‘President’ writing for us, and this month it’s CIPFA’s Andy Hardy. We also feature a ‘Lord’ and a ‘Sir’ – Lord Sikka and the FRC’s Sir Jon Thompson. Both are talking about the white paper ‘Restoring trust in audit and corporate governance’. There’s also a fantastic piece from ACCA putting the oil, gas and mining industries on the spot, and we have some great advice from CABA about coping with financial problems. On the news pages we have the March ACCA pass rates, CIMA launching a Resit Guide, and AAT calling for mandatory membership of a recognised professional body for anyone providing paid-for tax or accountancy services. Graham Hambly, Editor and Publisher, PQ magazine News 04 ACCA March results Despite all the disruption, the March pass rate are ‘looking good’

12 Tech news US set to retaliate over UK’s proposed digital tax

05 ACCA exam centres Association publishes list of latest exam centre closures

Features, etc 14 Have your say The remote exam calculator farce, and why ACCA needs to smarten up; plus our social media round-up

06 ICAEW March exams Students unhappy as remote exams hit by technical glitches

16 PQ Awards 2021 Who has made our short lists for this year? All is revealed…

08 Funding crisis Local councils face £605m funding shortfall

19 Wellbeing #1 Coping with financial problems during the pandemic

09 Accounting standards IASB extends support for accounting lessees 10 ICAS pledge Institute signs up to the Charter for Black Talent in Finance and the Professions

20 Audit reform #1 FRC chief Sir Jon Thompson on the impact the new white paper will have on the audit industry 21 ACCA spotlight Association

puts the oil, gaas and mining industries in the spotlight 22 PQ people How one PQ’s extra stressful exam day had the perfect ending 23 CIPFA spotlight #1 Why a great career awaits you in the health service; plus, which is the best calculator for the exam?

37 Profile How Katie Locke’s AAT studies landed her a top job in the City, and why remote learning worked for her 38 Wellbeing #2 The power of the ‘brain dump’

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24 Audit reform #2 Lord Sikka explains why the latest proposed reforms will not put an end to problems with audits 27 CIMA case study #1 Put your foot down for Acellerate – or how to tackle the Operational case study 28 CIMA case study #2 Students share their stories about how they passed their case studies 30 Measuring goodwill Top tutor Tom Clendon explains this important concept to give you that exam hall edge 31 Test bank So you think you know about Limiting Factor Analysis? Go on then – prove it! 32 Back to basics This month we look at weighted average cost of capital 34 CIPFA spotlight #2 How the institute’s five ethical principles can help you do the right thing

39 Careers Prem Sikka answers our Life at… questions; our Agony Aunt Karen Young has more wise career advice; and our Book Club review 40 Fun The lighter side of life; and more great PQ giveaways The columnists Lisa Nelson Improving your memory will pay off in the exams 4 Robert Bruce Collaboration is the key to societal progess 6

35 ACCA ATX exam ‘More discussion, less data’ is the maxim you need to adopt to pass this paper

Prem Sikka Reverse factoring is an area ripe for the regulators 8

36 Study advice Get a study buddy – after all, a problem shared is a problem halved!

Mike Day SMEs deserve better treatment from the big boys 12

Anna Kate Phelan Report’s of the office’s demise are premature 10

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PQ Magazine May 2021

LISA NELSON Everyone is a memory champion

If I were to ask you what happened in Wuhan in 2019 you might be excused for not saying that it was the location of the 28th World Memory Championships! The 2019 event was important because it was the first time it had been held in China, where the sport has become huge. Some 520 contestants from 40 countries came together to compete over three days. There are 10 events with titles such as abstract images, binary numbers and random words but people get most excited by speed cards – the card event equivalent to the 100 metres. How quickly could you memorise a shuffled pack of 52 cards? The world record is an amazing 13.96 seconds! Other events are equally impressive. How many cards could you remember in one hour – how about 2,530? But here is the important point: these amazing feats of memory are the result of hard work, technique and hours of practice, not a good memory. You have the ability to memorise significant amounts of information as long as you follow the same principles. The most popular technique is called Roman Room; check it out online, along with some other equally effective methods. What happened in 2020? Like so many other competitions, it was held remotely. Emma Alam from Pakistan won – she had been preparing for the event with her coach for the past two years! Lisa Nelson is Director of Learning at Kaplan

ACCA March pass rates ‘looking good’ Despite the global disruption, more than 92,000 ACCA students sat March exams, with a total of 3,440 completing their final exams to become ACCA affiliates. Pass rates certainly held up this March, and in many cases they were up on the December 2020 success rates. The March sitters of the AA exam managed something that hadn’t been seen since June 2017 – a 43% pass rate. However, those sitting the Applied Skills TX paper only manged a 46% pass rate. That is down five percentage points on December 2020.

At the Strategic Professional level, the SBL and SBR pass rates were a healthy 50% and 52% respectively. These are the best combined pass rates since the new papers were introduced in September 2018. AAA still seems to cause massive problems again. The March pass rate dipped, the worst in four sittings, to 32%. That means two out of three sitters (68%) failed this paper. The APM pass rate was 36% this time around. That is the best result since June 2016, but AFM slipped back to 39% (which is still quite high for this paper).

New Resit Guide launched CIMA has created a fantastic new resource for students who have ‘an unsuccessful exam attempt’ (failed to you and me!). The Resit Guide offers advice for both the OTs and case study exams, and CIMA feels it covers many aspects of exam preparation that are “all too often overlooked, such as the CIMA

blueprints and time management”. The guide asks students to create a personal SWOT analysis, to help sitters reflect on their strengths, weaknesses and the threats they face, as well as the opportunities open to them. Also covered are 10 easy steps for revision. Number one is to

Major overhaul for audit regime Contuinued from page 1 would be introduced on both auditors and directors around detecting and preventing fraud, with boards required to set out what controls they have in place and auditors expected to look out for problems. Audits will also be able to extend beyond a company’s financial results to look at their wider performance, including against key climate targets, to ensure investors and other interested parties are fully informed and can hold companies

to account as the UK seeks to eliminate its contribution to climate change by 2050. Many commentators were taken aback by the plans to make directors of the country’s biggest companies more accountable for what is perceived as negligence in their duties. Under the UK’s Corporate Governance Code, companies could be expected to write into directors’ contracts that their bonuses will be repaid in the event of collapses or serious director failings up to two

& policy, AAT, said: “Unregulated accountants make up a third of the accountancy sector, yet twothirds of agent-related complaints to HMRC are about unregulated advisers. Mandatory membership of a recognised professional body for anyone providing paid-for tax and accountancy services would address this by providing reassurance to clients that they will have protection if anything goes wrong and that their accountant’s technical knowledge is up-todate.”

Pap Public Finance Live CIPFA’s annual conference, Public Finance Live, is set to take place on 7-8 July 2021 at the QEII Centre, London. This year the programme features three content streams – Place, Planet and Profession. The CIPFA students NSF conference takes place on the Wednesday and is free for its students. They can also attend the full conference for the reduced price of £95 plus VAT. To find out more go to https://tinyurl. com/53p2ksxe

Alan Hatfield, ACCA executive director – strategy and development, said: “We are delighted with the results of this latest exam sitting, which saw 21,402 remotely invigilated exam entries across Applied Skills and Strategic Professional allowing many more students to progress than would otherwise have been possible.” ACCA MARCH 20201 PAPER PASS RATES BT 83%; MA 74%; FA 72%; LW 87%; PM 44%; TX 46%; FR 47%; AA 43%; FM 46%; SBL 50%; SBR 52%; AFM 39%; APM 36%; ATX 44%; AAA 32%

produce a revision timetable leading up to the exam date and stick to it. CIMA is hoping this new resource will prove to be an invaluable piece of guidance for students and help keep them on track to qualification. You can find the guide at http:// view.ceros.com/aicpa/resittersguide/p/1 years after the pay award is made, clamping down on ‘rewards for failure’. Directors would also need to publish annual ‘resilience statements’ that set out how their organisation is mitigating short and long-term risks, encouraging them to focus on the long-term success of the company and consider key issues like the impact of climate change. To read the 232-page consultation white paper ‘Restoring Trust in audit and corporate governance’ go to https://tinyurl. com/bu9rekfe

In brief Pap Time for formal qualifications AAT has called for mandatory membership of a recognised professional body for anyone providing paid-for tax or accountancy services. A study found 59% of those who have used a tax adviser or accountant were not aware that anyone can offer paid-for tax advice without being qualified, yet 63% thought they should have formal qualifications. Adam Harper, director of professional standards 4

Pap Climate change degrees take hold Climate change degrees are really taking off at pioneering universities to cater for the grownig demand for greener course, according to The Times. Students started a BSc in climate change for the first time this academic year at Liverpool John Moores University. This year (2021) Greenwich University will launch its course, followed by Northampton University in 2022. PQ Magazine May 2021

Join us at the PQ awards University of Liverpool’s Helen Scott summed it up when she said it felt like the ‘Accountancy Oscars’ when she discovered she was nominated – yes, the PQ magazine Awards 2021 shortlists are out. To help add to the excitement this year we released the finalists’ names over a few days, and that certainly worked!

Shake-up at the top of ICAEW

This year’s PQ magazine awards will be coming live online from Rogo’s HQ in trendy Shoreditch, London. You are all invited to accountancy’s biggest night for PQs, on Thursday 29 April. We kick off the night at 7pm. Just register on Eventbrite and we will update you with any last minute changes,

and remind you of where to go on the night. Sign up at https://tinyurl. com/n9yvdsp6

in Indonesia it’s Jakarta. Centre based exams in the following countries have been cancelled: Algeria, Argentina, Austria, Belgium, Belize, BosniaHerzegovina, Brazil, Canada, Colombia, Denmark, Estonia, Iraq, Israel, Italy, Japan, Kosovo, Latvia, Lithuania, Mexico, Montenegro, Peru, Poland, Portugal, Slovenia, South Korea, Spain, St Helena, Tajikistan, Turkmenistan, USA,

Venezuela. The following countries are only running centre based exams in these stated locations: Australia: Sydney, Melbourne; Cambodia: Phnom Penh; Indonesia: Jakarta: New Zealand: Auckland All other exam centres in these countries have been cancelled. To keep up-to-date with the latest news go to https://tinyurl. com/tfa5vb64

Latest ACCA exams centre closures ACCA has cancelled centre-based exams for the June sitting in 31 countries. The news of the closures, which came on 9 April, include Canada, Poland and South Korea (see below for the full list). ACCA explained that it will only be running exams in certain locations in four other countries. So in Australia we are talking about Sydney and Melbourne, and

PQ Magazine May 2021

Hazel Garvey has been appointed the new MD Education and Training at ICAEW. Garvey will be responsible for leading, developing and delivering ICAEW’s education and training strategy. She is currently Business Development Director for Learning and Professional Development. She trained as an ACA at a mediumsized firm after leaving school and qualified in 1989, she joined ICAEW in 1993. Garvey told PQ magazine: “I’m honoured to be taking the role of MD Education and Training and look forward to working with employers, member, students and colleagues to ensure the ACA remains relevant, attractive and prestigious, attracting a diverse, inclusive student intake.” As part of changes to the management structure Sharron Gunn has been appointed Chief Operating Officer (COO) and will oversee the majority of functions supporting ICAEW’s students. Mark Protherough, Executive Director for Learning, is leaving the organisation this month.

ROBERT BRUCE Collective thinking is a cause for optimism One thing that we have learned from lockdown is the importance of sharing skills and thinking. Collaboration may be the current cliché but it does work, particularly when people are predominantly working remotely. The launch last month of the Centre for Climate Change and Innovation is a good example. It combines the Royal Institution, a go-to place for the dissemination of scientific thinking, with Imperial College’s Grantham Institute to create, they hope, a structure that can bring together practical science and innovation. It is a wide, wide, umbrella of participants but one, they hope, that will attract a huge range of collective thinking. The hope, as the Deputy Mayor of London said at the launch, is that the Centre will be accessible to all Londoners as their city goes for net-zero by 2030. Beneath such high-flown language is a simpler global objective. The Centre will be open to all. Science may be the umbrella, but areas like finance will be part of the mass of policy and innovators. The influence of the Task Force on Climate-Related Financial Disclosures was acknowledged as a driver and as part of making ‘things here and everyday’. If the Centre can really act as a way of harnessing the understanding learned from our pandemic times that connecting and collaborating are the fastest ways to achieve objectives then the speed of making a difference can be accelerated. Robert Bruce is an award-winning writer on accountancy for The Times

Professional exam sitters hit by software glitches It was not all smooth sailing at the March ICAEW remote invigilated Professional exams, according to reports from some sitters. As one ACA trainee told PQ magazine: “It was awful for a lot of us.” We were told there were problems with the links, with many students even being told their session did not exist! One PQ told us after 10 attempts to get into their TC exam, they got in by an “alternate method”. The new inflo software in AA was also deemed slow, and took a long time to load and navigate. One sitter told us: “The exam software is just weird”. Another explained: “I sat an exam this morning and couldn’t access inflo until the last 20 minutes of the exam. I wasted

time contacting the invigilator who was no help and was then really panicked and stressed for the last two questions. Absolutely gutted! Felt confident before the exam.” A third PQ said: “I left an angry note all in capitals saying that inflo wouldn’t work for like 10 minutes!”

BPP sold to TDR Capital BPP has been taken over by private equity company TDR capital. TDR bought BPP from Apollo Group (now called Vanta Education) for an undisclosed sum. Apollo bought BPP for £375 million in 2009. BPP will be run as a standalone company under the existing

management team, and its HQ will remain in London. Current CEO Graham Gaddes said: “This is a significant vote of confidence not only in our business and our management team, but also its strategy and

Disgraced former PwC trainee jailed Former PwC Trainee Leon Chan has been convicted again for filming up the skirt of a schoolgirl on a train. In 2019, the 26-year-old was convicted of ‘upskirting offences’ when police found 1,500 images

on his phone, after he was seen following girls and women at London’s Topshop store. At Sheffield Crown Court recently Chan admitted the charges and was sentenced to 20 months in prison. On release

has been given a new title. He is now, according to a new filing with the US Securities & Exchange Commission (SEC), the Master of Coin. It is being speculated that this might refer to the company’s recent purchase of £1.1 billion of bitcoin. Elon Musk has also dropped his title of CEO. He now wants to be known as ‘Technoking of Tesla’. Musk (we assume he is keeping his name) is being sued by Chase Gharrity for his “erratic” and “unlawful” tweets. For more great fun stories see page 40.

Pap Back to basics for WACC Accountancy can be simple if you know the basics. And our Back to Basics video series is here to help you master the fundamental tenets of accountancy. If you don’t master the basic subjects, they can come back to haunt you. This month Sunil Bhandari is going to show you how to compute a company’s weighted average cost of capital. These are WACC skills that you will need for your FM and AFM exams. Read his article on page 32.

CASSL (the student society for London) is now putting together a response from students regarding the remote exams. An ICAEW spokesperson told PQ magazine:“This was the first exam session where we introduced new exam software, a new ICAEW Bookshelf and integrated data analytic software within the Audit and Assurance exam. “Overall, the new exam system, bookshelf and data analytic software worked well for the majority of our students sitting exams globally. Three per cent of students reported an issue during the exam session and our dedicated exam team were on hand to support all enquiries and provide solutions.”

the long-term future of UK higher education and professional training.” Jon Rosen, at TDR, said: “We are excited to work with Graham and his team and support the excellent work they are doing. We believe there are compelling opportunities to build on their strengths in the face of growing demand for high-quality education courses and training programmes.” TDR Capital owns a host of companies including David Lloyd Leisure, Stonegate Pubs, and recently formed part of a consortium that bought Asda from Walmart. he will be subject to a sexual harm prevention order for 10 years. He has also been placed on the sex offenders’ register. Recorder David Gordon stressed that anyone who thinks this kind of behaviour is trivial or not serious “needs to rethink their attitudes”.

In brief Pap Win an CIMA OCS exam kit PQ magazine has got together with top tutors HTFT Partnership to offer CIMA PQs the chance to win one of three exam kits up for grabs. This fantastic resource offers over 60 tasks and suggested solutions all based on the pre-seen of Accelerate, out now! Remember, this is the pre-seen for both the May and August case study exam. To find out how to enter go to 29. Pap The Master of Coin Tesla’s CFO Zach Kirkhorn 6

Pap Whistleblower to get payout EY is dropping an appeal against a judge’s decision ordering it to pay $10.8 million to whistleblower Amjad Rihan, who highlighted money laundering concerns. The case evolves around smuggling by organised crime and Dubai’s gold markets. Rihan welcomed EY’s decision to drop its appeal, but felt the firm’s leadership needed to do more to accept personal responsibility for the breaches of professional ethics. PQ Magazine May 2021

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PQ news

PREM SIKKA The scourge of reverse factoring

The issue for supply chain finance, or reverse factoring, has been highlighted for decades. In 2018, it was flagged by the collapse of Carillion. Under this, a company arranges a financial intermediary to pay its creditors early at a discount. Then, on the due date, the company pays the full amount to the financial intermediary. A fee is charged. In Carillion’s final balance sheet, nearly £500 million of reverse factoring was shown as ‘other creditors’ rather than bank borrowing or debt, which flattered its leverage ratio and estimation of financial risks. The practice also improved its debt to earnings ratio, which was a key covenant test between Carillion and its lenders. The disclosures were poor. Carillion’s collapse did not spur accounting regulators to issue a standard. The issues are raised again by the collapse of Greensill Capital, a provider of supply chain finance. It provided over $143 bn of reverse factoring finance to 10 million customers in 2019. Last year three of its major clients – NMC Health, BrightHouse and Agritrade – collapsed with billions in undisclosed borrowing. Hence the inevitable questions about how risks are portrayed in financial statements. Companies like Greensill secure their finance from other financial institutions. So there are ramifications for a large number of customers and suppliers of reverse factoring. Will accounting regulators act this time? Prem Sikka is Emeritus Professor of Accounting at the University of Essex

Local councils face £605m black hole Many UK local authorities face significant funding gaps and the financial outlook for the sector is concerning, according to a report from the National Audit Office. Its study revealed that 25 councils are at serious risk of going bust, and a further 337 are at a ‘high’ or ‘acute’ risk of financial failure. The NAO said that while effective action from government has assisted local councils in surviving financially during the Covid-19

pandemic, they have forecast that it has created £6.9 billion of extra costs in 2020-21 because of the need to deliver new services and

the increased cost of delivering some existing services. There have also been fewer opportunities to deliver savings programmes. The pandemic has also caused a forecast loss of £2.8 billion of income for local authorities in 2020-21, as a result of a reduction in their sales, fees and charges, commercial and other income streams. Authorities expect to lose £695 million from reduced car parking income, and £554 million income from facilities such as leisure centres, theatres and museums that they run. Further losses of £1.3 billion in council tax and £1.6 billion in business rates are expected but will not affect budgets until 2021-2022.

ICAEW to help rebuild Iraqi profession ICAEW has signed an agreement with the Iraq Union of Accountants and Auditors (IUAA) to help rebuild the profession in Iraq. President of the IUAA Jawad Al-Shehele and ICAEW President David Matthews co-signed the partnership agreement in midMarch. Established in 1969 in Baghdad, the IUAA is the country’s solely recognised national accountancy body. The ICAEW and IUAA will work together to develop professional education for accountants in Iraq.

ICAEW’s International Capacity Building (ICB) team will also review the current certified public accountant syllabus, and help develop a roadmap and action plan for reform. IUAA approached the ICAEW because of the UK’s body’s experience developing accountancy qualifications and its commitment to the benefits of a strong accountancy profession internationally. ICAEW has completed similar projects in 30 countries across Asia Middle East and Africa.

The ‘small talk’ module BPP university has introduced a ‘business small talk’ module on some of its courses to help students prepare for the world of work. BPP points to recent findings that show nearly 44% of 18 to 24-year-olds are more comfortable using digital devices to talk to people they don’t know than

speaking face-to-face. The university has called in a specialist conversation trainer to help. Georgia Nightingall will design and run a course for students teaching practical conversation tools to help navigate business small talk and accelerate relationship building. “Small talk is a soft skill that can

global minimum rate in order to secure a deal for the fair taxation of tech giants.

the support of the Local Government Association and Clean Up Britain campaign. Chewing gum contains plastic and it costs a reported £1 to remove each discarded piece.

be worked on and improved with practice. It is often seen as a challenge or a bit of waste of time, but it should not be because it is an important way to create trust, connect with people and build relationships,” said Nightingall. With Covid-19 having a profound impact on office life, the university will also offer online modules on ‘how to talk confidently in an unfamiliar setting’ and ‘how to have a difficult conversation’.

Taxwatch Pap New tax levels proposed Ireland, the Netherlands, and Switzerland could be the big losers under the new global tax plans being put forward by US President Joe Biden. The US wants to see a clampdown on companies using low tax countries to avoid paying their fair share of taxes. The White House says multinationals need to pay taxes based on their local sales in each country. European leaders seem to agree with the concept. It is understood the UK may back a 8

Pap Chewing over a new tax Prime Minister Boris Johnson looks set to bring in a chewing gum tax in an effort to raise £100 million to clean up British streets. Chewing gum manufacturers have been asked to pay for the clean-up ‘voluntarily’. The government plans to introduce a tax if the manufacturers fail to step forward, and the initiative has

Pap IMF wants Covid wealth tax To help tackle the cost of pandemic and the huge rise in public debt the International Monetary Fund is calling for new wealth taxes, income tax surcharges and solidarity business levies. It said that developed

countries (including Britain) have to seriously consider temporary tax increases to target support for vulnerable households, including women, minorities and the low paid – who have all suffered disproportionately in the last year. Among the other taxes the IMF said should be looked at are property and inheritance tax. Increasing these taxes could help promote greater fairness and be used to help protect the environment, explained the IMF in its ‘Fiscal Monitor’ publication. PQ Magazine May 2021

news PQ

NatWest faces money laundering charges The Financial Conduct Authority (FCA) has begun criminal proceedings against NatWest Bank over what it sees as compliance failures with the money laundering regs. The allegations date back to 2011 and run through to 2016. The watchdog says NatWest’s systems and controls failed to pick up on increasingly large cash deposits (over £250 million) being made into UK accounts. The FCA revealed the case was the first criminal prosecution under the money laundering regulations, and the first against a bank. NatWest has said it is co-operating fully with the FCA, explaining it “takes extremely seriously its responsibility to seek to prevent money laundering by third parties and accordingly has made significant, multi-year investments in its financial crime systems and controls”.

FME Learn Online continues to grow FME Learn Online have announced a new addition to the team, with Aileen Edgar joining the platform to deliver courses for ACCA TX. Edgar (pictured) is a former member of not one but three UK professional body tax examining teams. She has 12 years of experience in professional accounting education with ACCA, ICAS, ICAEW and three

accountancy colleges as a lecturer, examiner and marker. She regularly runs webinars for ACCA on using CBE for tax exams, debriefing past papers and training other tutors. “It is fantastic that Aileen has come on board at FME Learn Online. She is an expert ACCA Tax tutor and our students could not be

in better hands” said Sunil Bhandari, speaking on behalf of FME Learn Online. He added: “To be working with dedicated subject specialist tutors who own their own courses, delivered their way with one-to-one support, is what FME Learn Online is all about. “As I promised last year, our expansion will continue in 2021 as it did in 2020. Two new tutors will be launching their courses later this year – so watch this space!”

The International Accounting Standards Board (IASB) has extended by one year the application period of the practical expedient in IFRS 16 Leases to help lessees accounting for Covidrelated rent concessions. In response to calls from stakeholders and because the Covid-19 pandemic is still at its height, the board has extended the relief by one year to cover rent concessions that reduce only lease payments due on or before 30 June 2022. The original amendment was issued in May 2020 to make it

IASB extending support for accounting lessees easier for lessees to account for Covid-related rent concessions, such as rent holidays and temporary rent reductions, while continuing to provide useful information about their leases to investors. Access Covid-19-Related Rent Concessions beyond 30 June, which amends IFRS 16 Leases, go to https://tinyurl.com/3p37rav7

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PQ Magazine May 2021

ANNA KATE PHELAN Why the office is here to stay

As the exit strategy for lockdown lurches on, many of you will be considering what a return to the office may look like for you, if at all. In a recent Hays survey (see the front of the March issue of PQ magazine) only 12% of part qualified accountants said they would like to carry on working fully remotely. And just 30% would like to be working half remotely and half in the office. I am sure many of you would appreciate the guidance of senior staff, especially in stressful high pressure situations. The ease of knocking on a colleague’s door rather than patiently awaiting a response to a query may seem like a distant memory now, but it may be reality for many of you in the coming months. However, for many a return to ‘normal’ is not expected until 2022, according to nearly half (45%) of global CEO’s in KPMG’s 2021 CEO Outlook Pulse Survey. In the coming months, it seems as though a blended approach, with a mix of working from home and in office, will be the way forward as businesses attempt to anticipate what the future may look like as we once again emerge from another peak in the pandemic. Post-coronavirus, only a fifth (21%) of businesses are looking to hire talent that works predominantly remotely, according to the KPMG survey, so it’s safe to say the post office world many foresaw as a reality is now unlikely to come to fruition. Anna Kate Phelan is Senior Product Manager at Eintech

ICAS creating JOB OF lasting change THE

ICAS has signed up to the Charter for Black Talent in Finance and the Professions. The Charter was launched in October 2020 following the killing of George Floyd in the US. Bruce Cartwright, ICAS CEO, explained: “We want to be involved in this Charter, not because it is a quick fix for ICAS as an employer or for the sector as a whole. Rather, because

No time for sleep Goldman Sachs has promised to enforce its rule banning junior analysts from working at the weekends, after some said they were working on average 108 hours a week. A group of 13 first-year analysts petitioned the bank to cap the working week at 80 hours. They felt the bank had “inhumane” expectations, and felt current work hours were leading to mental health issues. Many analysts

PwC’s new ‘Deal’ PwC has told its 22,000 UK staff that they will all be allowed greater flexibility for post-pandemic working. In what is being called the ‘Deal’, the Big 4 firm is introducing blended working – there will be an expectation that people will spend an average of 40-60% of their time co-located with colleagues either in a PwC office or at client sites. It wants to see a reduced working week day on a Friday during July and August, too. The idea being that people will finish work at lunchtime because they have condensed their working week. The concept of an ‘empowered day’ is also being 10

we welcome the opportunity to challenge ourselves to do more, to take the lead in creating an inclusive profession where black talent can be identified, developed, nurtured and encouraged to succeed.” Cartwright said that at the heart of the charter lies a requirement for proper data collection, the establishment of action plans with ambitious targets for recruitment and progression, and senior executive accountability for delivery of the action plan. He added: “After the shocking events of last year it is not enough to say we are not racist. We must be anti-racist and positive about diversity. ICAS is showing this by our action and commitment, and by encouraging our members, students and partners to join us.” ICAS joins the ICAEW, KPMG, and PwC who have all pledge their support for the charter.

admitted they were sleeping for less than five hours a night. One analyst said they didn’t have time to eat, shower or do anything else, other than working from morning until after midnight. CEO David Solomon has promised to police better the rule that staff don’t work Saturdays, hire more junior analysts, and add staff to areas where work demands are more intense.

proposed. That means staff can opt for an earlier start and finish. EY funding laptops for the young EY is donating around £288,000 to 24 schools, charities, social enterprises and organisations that support young people and children based in the UK. The money will be used to purchase laptops for the young people they support. The one-off donation is part of EY’s wider focus on social mobility and aims to help support UK students to access the technology they need to continue their studies. EY’s UK Chair, Hywel Ball, said: “As one of the UK’s largest student recruiters, it’s important that we are playing our part and are accessible to the broadest range of talent. No student should be left behind,

MONTH PQ Assistant Accountant An outstanding opportunity is available for a PQ to join a consumer products/FMCG international organisation based in Uxbridge.

Annual salary will be £30,000 – £35,000. Your role will be supporting one of the senior members of the accounting team, especially around the monthend processes such as balancesheets, journals, accruals and prepayments, and intercompany reconciliations. You will also be expected to assist in VAT reporting, product and margin analysis, other elements of cost management and assisting the senior accounting team during audit and reporting periods. You will be a recent graduate, actively studying CIMA/ACCA and likely to be midway through these studies. Prior exposure to SAP is an advantage and strong Excel skills are required. Deadline for applications is 23 April. For the complete lowdown on this great job go to https://tinyurl.com/6ev3hyay

and I hope that our donation plays a small part in helping to support those young people who need it most at this difficult time.” 2022 before we return to normal Nearly half (45%) of CEOs don’t expect to see a return to ‘normal’ until 2022, according to KPMG’s 2021 CEO Outlook Pulse Survey. The study asked 500 global CEOs about their response to the pandemic and the outlook over a three-year horizon. A majority (55%) are concerned about employees’ access to a Covid19 vaccine, which is influencing their outlook of when employees will return to the workplace. A significant majority (90%) of CEOs are considering asking employees to report when they have been vaccinated. PQ Magazine May 2021

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MIKE DAY Why it’s time for a ‘fair buyers bill’ A level playing field can help boost the benefits of ecommerce and more. That means putting technology at the core of the business, so it can help it pivot quickly. So it can be more resilient and agile, when circumstances make it hard to do their usual jobs. It’s time for a ‘fair buyers bill’. Small businesses need the cash flow from the work they have done and invoiced to kick-start the economy. We need to put an end to late and unfair payment practices. That’s why Xero is calling for a ‘fair buyers bill’ to prevent large firms increasing payment terms for their small business suppliers. We’d like to see the government set 30 days as standard payment terms for all businesses, legislate on this issue and ensure that big businesses pay their small business suppliers on time. This call is supported by the research Xero has done since the first lockdown. It shows larger corporates have imposed poor and unfair payment practices on small business suppliers during the pandemic. These include: • Increasing payment terms: 59% of small business owners say big business customers increased payment terms during the pandemic. • Asking SMEs to change their wider terms and conditions: 49% of SMEs were asked to change their T&Cs by their larger clients. • Asking SMEs to do more for less money: some 40% of SMEs feel that their larger customers were asking them to do more for less money. Mike Day, Director, UK Education Sector, Xero

US looks set to retaliate over UK’s digital tax US retaliation for the UK’s digital services tax (DST) took a step closer as the Biden administration pushed for extra tariffs on goods. The 2% levy on tech giants’ UK revenues means more taxes could be payable for exporters to the United States on a wide range of goods including industrial robots, ceramics, kitchen tables and even chess boards. In all, some £236 million worth of goods are being targeted.

President Biden is now looking at other countries to see if retaliatory duties are needed there too – this

includes India, Italy and Turkey. The UK has said that it will repeal its digital tax once a global framework is agreed, but talks broke down at the Organisation for Economic Co-operation and Development. The next meeting is not until May. The UK government also feels that the DST is ‘reasonable, proportionate and nondiscriminatory’. However, the US Office of Trade Representation said the UK was breaking international tax principles by taxing revenue instead of profits. It also felt it was extending UK taxes beyond British territory.

Receipt Bank to rebrand as Dext

Thousands of email servers attacked Hundreds of UK companies have been ‘hacked’, in what is being called a global campaign run by Chinese cyber criminals. Cyber company ESET’s research revealed that over 500 email servers in the UK alone have been ‘compromised’, and the fear is that many companies are unaware that they are victims of the concerted attack. The hackers are exploiting the recent Microsoft Exchange vulnerabilities to compromise email

servers. In early March, Microsoft released patches for Exchange Server 2013, 2016 and 2019 that fix a series of pre-authentication remote code execution (RCE) vulnerabilities. These vulnerabilities allow an attacker to take over any reachable Exchange server, without the need to know any valid account credentials, making internet-connected Exchange servers especially vulnerable. ESET identified 5,000 email servers that have been affected globally.

have a headset on your head, but you actually get more of a sense of a presence rather than just sitting at your desk staring at Zoom.”

hackers have grafted their services on to university student services web pages, making them look more legitimate. Chatrooms are another area where the hackers have been able to sell their wares. Even more bold, the mills have run fake essay contests for students with the prize of a scholarship up for grabs.

Receipt Bank has scaled up to one million users – and is changing its name to Dext! The company added a quarter of a million to its total number of users in 2020 – that’s a 200% increase over the past two years. Receipt Bank now becomes Dext Prepare, with a “focus on the automatic capture and categorisation of financial paperwork in a fraction of the time”. It has also acquired data assurance software Xavier, which is being rebranded as Dext Precision. Dext CEO Adrian Blair said: “Dext backs accountants making better businesses. Our mission is to make accountants productive, profitable and powerful through getting a clear picture of business finances automatically and accurately.”

Tech briefs Pap From Zoom to VR The use of virtual reality headsets for work meetings could soar, says Joe Fitzsimons of the Institute of Directors. He told BBC’s Wake Up to Money programme “we’re likely to see it really take off quite quickly”. Many companies have been looking to combat ‘Zoom fatigue’. CEO Job Van Der Voort, of payroll company Remote, said: “The way we use virtual reality is to replicate that feeling where you can hang out together. You might think it’s weird, you have an avatar, you 12

Pap Essay mills get sophisticated Illegal essay mills have been using techniques that have helped disrupt elections and sell illicit drugs to promote their services to university students. New research in the US has found that hundreds of university websites have been hacked, helping to steer unwitting graduates towards the mills. The

Pap Here boy, I need a password! Cyber experts have urged people to follow best practice by making passwords with three random words after revealing 15%

of British people use their pet’s name to protect accounts. The survey of UK passwords showed they are often made up of things people can easily predict – such as their pet’s name (15%), family members’ names (14%), a significant date (13%) or their favourite sports team (6%). Some 6% of the UK admitted using ‘password’ as all or part of their password – meaning millions of accounts could be easily breached by criminals using trial-and-error techniques of common codes. PQ Magazine May 2021

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It doesn’t add up For many years I was responsible for training young accountants and I always insisted that every student register and read PQ magazine. I have always been an avid PQ reader and I love reading about the courses and myriad avenues to qualification. That said, in the April issue I read the perennial article ‘Time management still the key to success’ – when was it never so, I wonder. This was followed with an article entitled ‘Calculator rule problems’ and my heart went out to the student(s) that, faced with a refusal to allow them to use their calculators, had to actually use the screen calculator. Were this one of my students

I would be raising the matter in the strongest possible terms – a euphemism for getting bloody angry on behalf of my students,

and would be looking for exam fee re-imbursements if they were unsuccessful. A student’s calculator is unique to that student I would suggest in a blind test virtually every student could pick out their calculator as soon as they picked it up. So now, in the stressful situation of an exam, they are told they can’t use it and are having to resort to backups or worse still a screen calculator. Time management just got a whole lot more difficult and for what reason? Because a student so stressed didn’t argue with the invigilator? The result being no doubt they wasted time and energy throughout the exam. It’s just not good enough. Tony Margaritelli, Chair, ICPA

Confusion still reigns over what calculator is allowed in the ACCA exams after the March sitting – just check out the letters! A student posted a picture on a Facebook Group and asked: “I just want to ask if this calculator is allowed in the ACCA exams?” He was told by one student: “I had the same and it was allowed.” However, another said:

Our star letter writer wins a fantastic ‘I love PQ’ mug! Calculating success What is the ACCA doing? The remote exams are tough enough without over-zealous invigilators telling students the calculator they have used for all their exams to date is not allowed! The ACCA rules state: “You are not permitted to use a dictionary or an electronic translator of any kind or have on or at you desk a calculator which can store or display text.” If you scroll down the rules (7) also say you are not allowed to attend the exam with a weapon. Sorry, I got distracted! Why doesn’t ACCA simply publish a list of approved calculators? That would make life so much easier for us PQs. How about a PQ campaign on this one? Name and address supplied The Editor says: I like the idea of an approved list. I will ask the ACCA what they think and get back to you.

Loved the cover How about the Desk-o-bed-osofa? I am also pretty sure I need a ticket to the Isle of Wright, and the HM Prison new exam centre. Congratulations on the latest issue! The cover page is fantastic. Professor Sikka’s column is

wonderful too and thank you for putting up the piece on bitcoin being not so green. Look forward to reading the rest of issue. Bincy George, LinkedIn The Editor says: Thanks Bincy, I hope you got to the end of the

magazine! You have even more to read from Prem Sikka in this issue. On top of his regular column we have his thoughts on the proposed changes to audit (see page 24), and he’s also featured in our Life at… column this month (page 39).

“I had the same and it was not allowed.” Two PQs then weighed in explaining they had used the same one for every ACCA exam. It’s hardly surprising that students are confused. We were all over twitter with the March ACCA exam results when they were released. One student asked if the results were worldwide. They always are. Although it might be good to see a breakdown by country or even region just occasionally. No one seemed surprised by the 32% pass rate for AAA. It was the lowest of all the ACCA exams – again. “Why am I not surprised,” said #November22. Everyone seems to love the way we pushed out the shortlists for the PQ magazine Awards 2021 this time around – move over the Brits! Remember, you too can join us on the night to discover who walks off with a coveted PQ trophy. Past winners are very keen to add to their collection, and you can win an award more than once, as this picture shows. We love the fact that their AAT trophy has been pushed to the back!

PQ Magazine PO Box 75983, London E11 9GS | Phone: 07765 386489 | Email: graham@pqmagazine.com Website: www.pqmagazine.com | Editor/publisher: Graham Hambly graham@pqmagazine.com | Associate editor: Adam Riches | Art editor: Tim Parker Contributors: Robert Bruce, Prem Sikka, Lisa Nelson, Anna Kate Phelan, Mike Day, Tony Kelly, Phil Gammon, Edward Netherton | Subscriptions: subscriptions@pqmagazine.com | Origination services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email admin@pqmagazine.com

Published by PQ Publishing Ltd © PQ Publishing 2021

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PQ PQ awards 2021

#PQAwards 2021 –

the shortlist Thanks to the hundreds of people who entered this year’s awards – it was another record year for entries. But only six names can go on each shortlist and here they are

he countdown is now on the first-ever online PQ awards ceremony, and the big night is just weeks away. We will be LIVE online on Thursday 29 April, at 7pm. Make a date in your diary! And everyone is invited to join us for accountancy’s biggest night for PQs. Come dressed up or dressed down, we don’t mind, join us at 7pm for the fun! If you register on our Eventbrite page we will be able to update you with any last minute changes, and will remind you of where to go on the night. Sign up at: https://www.eventbrite. co.uk/e/pq-magazine-awards-2021tickets-149674792333. So, who made it on to the final list? Here’s the full shortlist for 2021:

• Northern Chartered Accountants’ Student Society (NCASS) • North West CIPFA Student Network (NWCSN) • The Lincoln Student Management Investment Fund (LSMIF), University of Lincoln • UK ACCA Distance Learning Students Facebook Group

ACCOUNTANCY BODY OF THE YEAR The usual suspects – to be announced on the night

ACCOUNTANCY COLLEGE OF THE YEAR

STUDENT BODY OF THE YEAR • Birmingham Chartered Accountants’ Student Society (BCASS) • East Anglia Chartered Accountants’ Student Society (EACASS) 16

Public Sector • CIPFA’s CETC • Queen Mary University, London • University of Lincoln • University of Liverpool • University of South Wales • University of West London, The Claude Littner Business School

Private Sector • First Intuition • Future Connect • HTFT Partnership • Kaplan • LSBF • Osborne Training

ONLINE COLLEGE OF THE YEAR • • • • • •

First Intuition Distance Learning FME Learn Online LSBF Osborne Training Premier Training Training Link

LECTURER OF THE YEAR Public Sector • Anna Hardy-Watmough, Manchester Metropolitan University • Terry Hunt, Southend Adult Community College • Usha Mistry, London South Bank University • Helen Scott, University of Liverpool • Dr Dinusha Weerawardane, University of West London • Rebecca Wright, University of South Wales Private Sector • Tom Clendon, FME Learn Online • Alan Dawson, Premier Training • Dr Constantine ‘Dino’ Kritsis, Study Smart • Waleed Minhas, Kaplan Professional ME • Bev Roberts, Training Link • Regwana Uddin, LSBF

STUDY RESOURCE OF THE YEAR • A Walkthrough of Real Examination Answers, CIMA PQ Magazine May 2021

PQ awards 2021 PQ

• AAT Level 3 Advanced Diploma course, Mindful Education • CBE Practice Platform, ACCA • Free AAT revision sessions, First Intuition • Free online classes, Open Tuition • Remote invigilated exams, ICB

INNOVATION IN ACCOUNTANCY • AATitude Accountancy Festival, First Intuition • ACCA Professional Insights Team • ICB TV • HTFT Play • The Bookkeepers Summit, ICB • The Bookkeepers’ Podcast – Zoe Whitman & Jo Wood

BEST USE OF SOCIAL MEDIA • • • •

First Intuition Distance Learning Jason Nye, CIMA Kaplan: Instagram Live #StaySafeandKeepStudying campaign (Premier Training) • Study fun group (light-hearted, not affiliated to any professional accounting body) • ‘Ask Jen’, Training Link

MENTOR/ TRAINING MANGER OF THE YEAR • • • • • •

Jon Block Becky Hennessey Greg Houston Tim Jones Umar Tariq Christine Walls

PQ Magazine May 2021

ACCOUNTANCY TEAM OF THE YEAR • Dunelm Optical Company • East Lancashire Hospitals NHS Trust Finance Team (ELHT) • Infinity Partnership • Red Funnel • The Finance Department @ University Hospitals Birmingham NHS Foundation Trust • Jo Wood Virtual FD

ACCOUNTANCY PERSONALITY OF THE YEAR • • • • • •

Louise Ball Garry Carter Philip Dunn Laura Gough Andy Hardy Kelly O’Donovan

EDITOR’S SPECIAL AWARDS To be announced on the night

• • • • •

Kal Ali Zak Barwell Andra Blaj Craig Peacock Amy St Romaine

NQ OF THE YEAR • • • • • •

Lauren Gough Sophie (Louise) Hatton Laura Day-Henderson Joshua Higham Chilufya Mulenga Ryan Wale

DISTANCE LEARNING STUDENT OF THE YEAR • • • • • •

Demel Johnson Elizabeth (Liz) Jones Natia Kvartshava Amanda Millward Lynn Tanigawa Kalkidan Wodajo

ACCOUNTANCY GRADUATE OF THE YEAR • • • • • •

Saida Acugba Courtney Leonard Rhianna Lindsay Muhammad Malek Emma Mellor Yusuf Yader

APPRENTICE OF THE YEAR

PQ OF THE YEAR • • • • • •

Evie Barnes Simon Cordell Noah Davis Emma Dykes Lindsey Welsh Catherine (Cathy) Wright

• Haider Ali 17

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wellbeing PQ

Don’t suffer in silence Paul Day has some advice on coping with financial anxiety during Covid-19

alking about your finances is never going to be easy. Along with politics, sex and religion, the subject of money is often considered to be a deeply private matter – something never to be discussed in public or even among members of the same family. That is why so many of us remain silent, even when we’re suffering. The barriers preventing us from reaching out and asking for help when we’re experiencing financial hardship can sometimes feel simply too high to overcome. With accountants, this can be even more excruciating. The added stigma of being a financial professional whose own finances are in question only increases the sense of shame or failure. In the midst of a global pandemic, which has impacted many of our finances for a year at this point, many of us are worried about our personal finances, our businesses and our futures, but we can find strength in solidarity. Now, more than ever, we need to break down those walls and learn how to ask for help. Failure to do so could have severe and longlasting consequences. Citizens Advice found that 74% of people who have financial difficulties have experienced mental health issues, leading to over half having had panic attacks. Increased stress levels also lead to a lack of sleep, which can impact physical health. At the same time, financial wellbeing can have a profound effect on personal relationships, isolating people from support systems when they might need them the most.

So, how do we ease the burden and empower people to open up about money? Time to take control Financial wellbeing is about control. Control over your day-to-day decisions and long-term goals. When we lose this sense of control, we find ourselves stifled, caged in, helpless. Anxious thoughts start to cross our mind. Can I pay rent this month? Will I ever be able to buy my first home? Do I have enough money to support my family? Will I have enough money saved to enjoy retirement? Many of us might find ourselves worrying about these questions on a more regular basis now as the world enters a period of economic uncertainty. Anyone can have these feelings, regardless of income or profession. It’s dangerous to assume that just because someone is earning a high salary, they automatically acquire the status of being financially solvent. For example, Salary Finance’s UK Employers’ Guide to Financial Wellbeing survey, found that those earning over £100,000 reported the same level of concern about their personal finances as those earning less than £10,000. This could be because of cash flow or debt challenges which inhibit them from saving, or personal circumstances. Likewise, being a chartered accountant does not make you immune from the difficulties the economy is facing. Any financial professional, no matter how successful they are, could face redundancy, or seeing their practice lose important clients.

Emily: a case study Emily, a student in the final year of her ACA training contract, gets in touch with us via our live chat function on the website. She’s doing well with her studies and has passed all of her exams. When she was at university, she spent heavily on a credit card and while she has worked hard to get her finances in order, the high interest rate is preventing Emily from making a reduction in the balance. She’s had to turn down an invitation to a colleague’s leaving meal and her cousin’s hen do and is feeling embarrassed about it. Emily and I work out a budget that she will adopt moving forward. There are a few changes she can make such as switching her car insurance and cancelling some barely used subscriptions that will give her flexibility to not only maintain her minimum payments but also reduce the balance, too. PQ Magazine May 2021

Accepting that these feelings are normal and that you are not alone is the first step towards better financial wellbeing. This will allow you to be kinder to yourself and create space for you to unravel your thoughts and anxieties. Once you have a better understanding of what you’re feeling, you should find it easier to open up and take the first steps towards better financial wellbeing. Take stock of your finances Before you reach out for help, it’s useful to have an accurate picture of your financial situation. Knowing your income, expenditure and disposable income once your day-to-day expenses are covered will give you confidence in your decisions and help you to create a budget: see https://tinyurl.com/ykc2s8sj. If your partner or spouse usually looks after the finances, be sure to talk the budget through with them, so that you both understand your financial situation. Tackling any outstanding debts you owe during this time might seem a daunting prospect but it’s okay to ask for help. There are constructive and positive steps you can take to work your way towards becoming debt free – and what’s more, there are plenty of online guides that will walk you through every step of the process: go to https://tinyurl.com/ujbvvrpm Look for the positives Remember, you don’t have to struggle alone. CABA, the wellbeing charity, offers a number of free self-help guides on its website that can help you to deal with financial anxiety. It’s dedicated financial wellbeing page features a tailored toolkit of free services and self-help resources relevant to you: https://cabafinancial. org.uk/ . • Paul Day is a Support Officer at CABA, the charity supporting the wellbeing of chartered accountants and their families

PQ the audit market

Creating an independent audit profession FRC CEO Sir Jon Thompson was recently in conversation with ICAEW chief Michael Izza. So did he think the new White Paper will change the audit profession forever? reating an independent audit profession will be one of the biggest challenges in the government’s latest proposals to overhaul the UK’s audit regime, according to the FRC’s Sir Jon Thompson, the man who will have a major part in making change happen. In a recent webinar with ICAEW CEO Michael Izza, Sir Jon admitted that the creation of an institute of corporate auditors was “a difficult thing to envisage”. He felt that giving birth to a new institute and getting people to support it was going to be hard. “It is a significant thing to try to attempt,” he said. Sir Jon said he understood the government’s desire to want to drive improvement in the quality of audit, and accepted its decision to create a new profession. However, he thought that the transition to an independent audit body could prove problematic, and he wondered if a totally separate profession was the right way to go. He thought organisations like the ICAEW (and ACCA) could offer two qualifications – one for auditors and one for everyone else. Although this wasn’t Sir Donald

Brydon’s vision (he wanted total separation), Sir Jon felt a market-driven response could still get the profession to where it needed to be. Sir Jon also stressed that a major part of the proposals was the focus on boardrooms. He said: “Boards run companies and they should be held primarily to account when things go wrong.” He includes non-executive directors in this, too. This should, he emphasised, then help people see the auditor’s role in context. When it comes to audits and auditors, Sir Jon

acknowledged they have had a bad run in the media. But he felt all the Big 4 were trying to do more to create a better end result. And when it comes to operation and separation change is already happening. Two of the Big 4 have sold parts of their businesses, and KPMG, for example, has split the traditional role of the MD into two roles. The three recent reviews of the audit profession created some 155 recommendations (if you don’t count others from parliamentary committees), and he said the White Paper has taken forward 80% of them, amended around 10%, and rejected just 10% of the proposals. The consultation now runs until early July and Sir Jon felt it will take several years to implement all the proposals even when the legislation is finally passed. Whether this all means audit is an attractive profession to join is a worry for some. Sir Jon felt as an auditor’s role expands, to include things like climate change and the environment, a new generation will hopefully be drawn to it. He said: “It is a fantastic career and one I did for five years.” Michael Izza agreed and added: “A profession with a purpose is what we need.” To read ‘Restoring Trust in audit and corporate governance’ in full go to https://tinyurl.com/ bu9rekfe

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PQ Magazine May 2021

ACCA spotlight PQ

Could do better ACCA Richard Martin explains the association’s research into the annual reports of oil, gas and mining companies – and the fact that they could do better

ccountants, along with colleagues in other teams such as investor relations, corporate communications, marketing and policy, play a key role in creating annual reports. These documents explain the performance of a company to its shareholders and other stakeholders – detailing key results for the strategic year including externally audited financial statements. They can be complex and challenging documents to pull together from a preparer’s point of view because they must include information demanded by regulators – such as financial reporting under financial rules and standards. Increasingly, organisations are also being asked to define and disclose their risks in their annual reports. One such risk is the impact of climate change on a business’s short, medium and long-term operations. At the Rio 2012 Earth Summit, investors called for the integration of

PQ Magazine May 2021

material sustainability issues within companies’ annual reports. More recently, large investors called for mandatory inclusion of such information in companies’ accounts and the Bank of England expects climate change risk related financial disclosures to become mandatory soon. In our recent detailed analysis with the University of Glasgow Adam Smith Business School of mining, oil and gas companies’ annual reports, we found the need for more clarity and depth in their climate change related disclosures. For this report, called ‘Climate Change Risk-related disclosures in Extractive Industries’ we looked at 60 companies’ 2019 annual reports, including BP, Tata Steel and ArcelorMittal. It’s a study that sheds light on the current climate change-related reporting practices of these companies. And what we’ve found is that many companies do not sufficiently engage with disclosures about their climate change-related risks.

Our findings reveal that these companies provide, on average, overly generic disclosures and they hold back on discussing how climate change risks affect their operations. Only a small number of companies acknowledge the central role of climate change on their current and future activities. Our research also shows that these companies rarely provide an in-depth discussion in their reports about the climate change risks that they are facing or the impact of climate change risks on their operations. With COP26 planned to take place in Glasgow in November, this analysis comes as a wakeup call for the industry, and those who invest in it – what we need to see is an urgent improvement in climate change-related disclosures. These are companies with huge operations in oil, gas and mining, and they contribute significantly to global greenhouse gas (GHG) emissions. Climate change can no longer be seen as a side effect of their operations but as a central issue for their business model and a core business risk. Key findings in our report ‘Climate change risk related disclosures in extractive industries’ reveal: • 60% (36) identify addressing climate change risk as an integral part of their business model. • Only four companies (7% of the sample) provide performance indicators where financial and climate change-related information is integrated. • Only 10% (6) disclose that they incorporate climate change risks in their estimations of future cash flows, as part of their impairment testing calculations. • None of the sample companies identify climate change risk as an important factor in determining their assets’ useful lives. Our analysis raises questions over the consistency, relevance and decision-usefulness of these companies’ financial reporting. In the management report – the ‘front end’ of the annual report – though most make reference to the issue, not all by any means provide adequate information about how climate change risk may impact their reserves, the results of different climate change scenarios or how their business model is adjusting to these immense risks. There is a fundamental issue here about transparency, and the fact that their large reserves may be rendered ‘stranded’ if governments decide to ban oil exploration, as Denmark announced recently. So what should the future look like? What we want to see are sustainability reporting standards that aim not only to provide decision-useful information to investors, but importantly, should also drive changes in corporate behaviour in support of positive social and environmental outcomes. Accountants have a huge role to play here because it is a profession so fundamental to ensuring that corporate reporting is accurate, regardless of whether the disclosures are mandatory or optional. It is an exciting time to be an accountant, to be part of this change to create value and corporate transparency. • Richard Martin is ACCA’s head of corporate reporting 21

PQ PQ people

You thought your exam day was tough… Top tutor Sean Purcell explains how a stressful SBL exam day finished on a perfect note for one sitter

xams are tough. But spare a thought for my student, George, who was taking his ACCA SBL exam in March – his very last exam. One issue that concerned him a little was the fact that his partner was expecting a baby a couple of weeks after his exam date. But he thought everything was going to be perfect; he would be able to complete his last exam, have a bit of a celebration and then look forward to the birth of his daughter. However, as we all know, perfect plans rarely lead to perfect outcomes. So on the Monday evening (the day before his SBL exam) his partner’s waters broke and he needed to get her to hospital pretty quick. The midwife predicted that she would probably give birth about 1pm the next day. The problem was George was due to sit his SBL by remote proctoring, which to the unfamiliar is the method whereby ACCA students during Covid are able to sit their exams at home, having

gone through a fairly rigorous technology audit to ensure that no pops or messages can be received on their home computer during the exam. George was told by the midwife at the hospital to go home on the Monday evening and that she would call him when the baby was on its way. The problem was George had spent lots of time and effort preparing for his SBL, including sending in lots of homework and completing multiple four-hour mocks on the ACCA CBE platform. He was torn between not doing the exam and being present at the birth of his daughter. His exam was due to start at 9.30am and finish at 1.30pm, about the time his daughter was expected to be born. So he spent his whole exam expecting a phone call (of course in a remote exam you are not allowed phones. George had his turned off!). The happy ending was that he managed to complete the exam, right until the end log off,

and jump in his car. He got to the hospital just in time for the birth of his daughter. So there is always someone worse off than you and the morale of all this is never give up until you have to – a great metaphor for your studying. Congratulations George!

Leading Inclusion The latest professional insights report from ACCA, Leading Inclusion, discusses the important subjects of diversity, inclusion and equity. Ensuring that accountancy is a profession that is open to everyone.

bit.ly/leading-inclusion

PQ Magazine May 2021

CIPFA spotlight PQ

Why work in health services? CIPFA President 2020/21 Professor Andy Hardy reflects on a tough but rewarding year and why he would recommend PQs work in public finance he

pandemic is one of the biggest challenges we have ever had to face in the health sector. Throughout the course of the year, frontline health workers have responded heroically to the seemingly impossible task of battling this virus. Looking back on the trials of the pandemic, I could not be prouder to have dedicated my professional career to working within the NHS. While Covid has without a doubt been an incredibly challenging period, it has also been one of the most fulfilling. Last year, my health trust, University Hospitals Coventry and Warwickshire NHS Trust, administered the first Covid-19 vaccine outside of a clinical trial. This was one of the proudest moments in my career thus far. When I first entered the profession, I had no idea that I would land where I did. In fact, I got into accountancy by accident. After studying economics, I was asked to interview as a trainee accountant. I quickly realised that

the public sector ethos of helping others really motivated me to get my CIPFA qualification and continue seeking public finance roles. I have been working within the NHS ever since – from that first role of a trainee accountant to CFO and now CEO of UHCW. When I first began, I also wasn’t aware of the diversity of options available in the public sector. While I’ve chosen to dedicate my career to health services, there are many other paths to take that are aligned closely with generating good health outcomes. Working in social housing, education or

police and fire services are other routes within the public sector that make a significant impact on the lives of vulnerable populations within our communities. If you are interested in finance and pursuing a career that truly helps people, this could be the path for you. Many do not realise that when you work in the public sector, even in finance, you truly are on the frontline of helping people in local communities. The management of financial resources has been crucial in enabling health workers to fight the pandemic, by ensuring that they have the tools

they need to get the job done. My experience as CIPFA President has allowed me to reach people and inform them of the benefits of joining the public finance profession. While my tenure has been entirely virtual, I have done my best to reach out to CIPFA members, students and other finance professionals to offer insights on how to solve the challenges that they are currently facing and help prepare them for the future. I would not have been able to achieve half of what I have today without the insights and advice of those who came before me, and I am committed to providing this to those who will become the public finance leaders of tomorrow. I truly believe in the public sector and the hardworking people who have dedicated their lives to helping others. A career in public finance is about more than just making money, it is about working for the greater good and making a difference in people’s lives. • Professor Andy Hardy is the 2020/21 CIPFA President and the CEO of University Hospitals Coventry and Warwickshire NHS Trust. He is also the senior responsible officer for the Coventry and Warwickshire STP/ICS

AAT exams PQ

Your number’s up

Which calculator would be the perfect exam buddy? Steven Nash knows, you know

hich calculator can I use in my AAT exams?” That is a question I get asked many times, year after year, and to be fair it’s a great question! The choice available is as vast as it is wide (with one to suit any budget). Testing centres should provide you with a calculator to use in your exam, but are you going to be happy with one that you’re not necessarily familiar with? Generally speaking, it can be far less stressful if you’re able to use your own, as you’re likely to be more comfortable with the layout. This is all good and well, but as testing centres have certain rules regarding the use of external equipment under exam conditions, which ones are you allowed?

‘W

PQ Magazine May 2021

Essentially, what it boils down to is the following three rules: • Your calculator must be silent. • Your calculator cannot be capable of storing text. • Your calculator cannot be programmable. As long as it complies with these three rules, then it is allowable. But is it suitable? After all, there are certain key functions that are vital. As a minimum, it should have a percentage and a square root function, which would suffice as a starting point. But if you’d like one that’ll take you through all levels of your AAT studies then you need to consider something a bit more advanced. It’s not necessary to go for a really expensive one with all the bells and whistles, as you’re unlikely to be able to use it under exam conditions. The examples (as outlined above) would see you through all your exams and beyond. All of the above being said, if you’re unsure, you can always use the ones provided by the test centre. • Steven Nash is a tutor at Training Link 23

PQ viewpoint

Audit reform is not what it seems Lord Sikka explains why the latest reforms are unlikely to end audit woes n recent years, there has been a steady parade of corporate governance, accounting and auditing scandals. Names such as BHS, Carillion, RBS, HBOS, Thomas Cook, Patisserie Valerie, London Capital and Finance, Redcentric, Quindell, Autonomy Corporation, Connaught, Blackmore Bond, Woodford Equity Income fund and many others have entered the roll of dishonour. The finance industry has mis-sold numerous financial products relating to pensions, endowment mortgages, precipice bonds, split capital investment trusts, payment protection insurance, mini-bonds and much more. Interest and foreign exchange rates have been rigged. The UK has become a global hub for money laundering, tax avoidance and illicit financial flows. Thousands of people have lost jobs, savings, investments and pensions. Against the above background, the UK government has published its consultation paper, titled ‘Restoring trust in audit and corporate governance’, with the aim of “improving the UK’s audit, corporate reporting and corporate governance systems”. This article provides a commentary on some of the proposals.

Empowering shareholders Once again the government seeks to empower shareholders. The difficulty is that they have a short-term interest in companies as they chase higher returns. There is little evidence that they had any long-term interest in invigilating directors or auditors at Carillion or crashed banks. Shareholders at family-controlled companies, such as BHS, have incentives to prioritise their private interests. This leaves other stakeholders, such as employees, pension scheme members, and suppliers in the cold and the consultation paper has no plans to empower them. Holding directors liable Directors of large companies may be held personally responsible for the accuracy of corporate financial statements and in cases of errors, deception and negligence face the prospect of a clawback of a portion of executive remuneration. The difficulty is that the UK has no central enforcer of company law. Executive employment contracts are not publicly available and annual financial reports rarely provide comprehensive information. The government’s preferred option is to seek 24

changes to the UK Corporate Governance Code “to include provisions which recommend that certain minimum clawback conditions or “trigger points” are included in directors’ remuneration arrangements”. This will achieve little as compliance with the Code is voluntary. It does not empower stakeholders and cannot be enforced by courts. Audit, Reporting and Governance Authority A large part of the consultation paper is focused on audit reforms and is based upon the proposals advanced in the Kingman Review, Brydon Review and a report by the Competition and Markets Authority. Following the Kingman Review, the Financial Reporting Council (FRC) is to be replaced by the Audit, Reporting and Governance Authority (ARGA) with extended powers for corporate reporting review function, enforcement of the corporate reporting duties of directors and calculation and disclosures of distributable reserves. It will also enforce standards for FTSE 350 companies’ audit committees However, there is no attempt to streamline regulators. Auditors will still be regulated by the ARGA plus four recognised supervisory bodies, resulting in duplication and buck-passing. ARGA is identified as an ‘independent’ regulator, but what will it be independent of? Big accounting firms and corporations will continue to colonise its operations, committees

and working parties. It will still follow the international accounting and auditing standards. All this brought the FRC into disrepute and the consultation paper is silent on how the capture of ARGA by corporate interests is to be prevented. The focus on distributable reserves is welcome, but that requires major changes to accounting practices. Balance sheets contain items based on historical costs, net realisable values, fair values, mark to model, present values and much more. The addition of these random numbers does not lead to any meaningful calculation of capital maintenance, which is essential for any calculation of distributable reserves. The consultation paper does not offer any proposals for reform. Audit market and competition The Big 4 accounting firms audit 97% of FTSE 350 companies and there is little choice at the top-end. The collapse of a big audit firm could cause considerable market turbulence. However, a break-up of the big audit firms is not on the agenda. Joint audits involving big and medium-size firms would enable mediumsize firms to get a toe-hold in the big company audit market, but the government does not opt for that. Instead, it calls for “managed shared audit requirement for UK-registered FTSE 350 companies”. This will compromise the independence of the junior firm even though it is PQ Magazine May 2021

viewpoint PQ hints that more liability concessions may be showered upon auditors. Auditor and fraud The consultation paper would require directors to explain the controls which prevent fraud. Auditors would be required to report on the steps they took to detect any material fraud and assess the effectiveness of relevant controls. The 2020 court judgment in the case of Assetco plc v Grant Thornton held that under certain circumstances auditors can be held liable for failure to spot management fraud. The key is auditor scepticism and that can’t be addressed without dealing with issues about fee dependency and independence.

will sign the audit report as an equal and share liability as an equal. Currently, new suppliers can’t enter the statutory audit market as the law requires that the entity delivering the audit must be under the control of individuals licenced to carry out audits. This effectively prohibits technology and other businesses from entering the audit market. The government has no plan to remove barriers to entry. It is also worth remembering that not so long ago, the audit market was dominated by the big eight accounting firms, and there were plenty of accounting scandals. So competition isn’t necessarily going to improve the quality of audits. Auditor independence Auditors are dependent upon companies for their appointment and fees. This dependency is worsened by the sale of non-audit services to audit clients. Auditors then audit the resulting transactions. BHS paid its auditors PwC £355,000 in audit fees and £3,303,000 in consultancy fees. Fee dependency buys auditor PQ Magazine May 2021

acquiescence and PwC partner backdated the audit report for good measure, too. Public Sector Audit Appointments, an independent body, appoints and remunerates auditors of local councils and public bodies, but the government is content to let companies and their directors appoint and remunerate auditors, albeit through audit committees. All major companies involved in headline scandals had audit committees and it is hard to see how persisting with the same will yield different results. That said, the government hints that it may authorise ARGA to appoint auditors under certain circumstances e.g. when shareholders vote against an auditor appointment. There needs to be a complete ban on the sale of consultancy services by auditors to any audit client. The best way of achieving that is to have firms whose sole business is to conduct audits. However, that is not on the agenda. At best, we may end-up with an organisational split of the big auditing firms; that is a firm with two divisions under common control, one arm selling audits and the other selling consultancy to the same client. So auditors would continue to be mired in conflict of interests. There is little chance that the auditing arm would find fault with internal controls installed by the consultancy arm of the same firm. Auditor liability A major reason for audit failures is the weakness or absence of pressure points to improve audit quality. The producers of potato crisps and toffees have to ensure that their product is safe and they owe a ‘duty of care’ to current and potential consumers. However, that does not apply to auditors. At best, they owe a ‘duty of care’ to the company and not to individual stakeholders injured by their negligence. Successful litigation against negligent auditors is rare. Therefore, threat of liability does not act as a pressure point for improvement of audit quality. Rather than reforms, the government

Public accountability The FRC has stated that more than 80% of the audits in its sample needed “improvements required” or “significant improvements required”. Most of these were carried out by the Big 4 accounting firms – PricewaterhouseCoopers (PwC), Deloitte, KPMG and Ernst & Young. There is considerable information asymmetry between auditors and consumers of audit opinions. For example, the BHS scandal revealed the PwC audit partner spent two hours on audit and 31 hours on consultancy. The audit team was under the day-to-day control of a person with only one-year’s post-qualification experience and the audit team mix was poor. Many of the basic audit tasks were not carried out. All this was acceptable to internal norms of the firm. A reduction in information asymmetries can empower consumers to exert pressure on auditors to improve quality. Imagine if auditors had to publish their time budget, composition of the audit teams, time spent by each grade of labour, a list of key questions and replies secured and a list of recent regulatory action against the firm. However, none of this is on the government agenda. A professional body for corporate auditors Following the Brydon Review’s recommendations, the consultation paper invites comments on the possibility of creating an audit only professional body. It is hard to see how a new body can address auditing woes stemming from lack of independence, poor liability, poor public accountability, inadequate liability and a corrosive organisational culture that prioritises profits and appeasement of corporate directors. If anything a new body will create further barriers to entry. Timescale When will the above be implemented? The consultation period ends on 8 July 2021. The government has given no firm commitment for legislation and says that it will act when parliamentary timetable permits. Even after legislation, it will take many years for the reforms, such as the organisational split of audit firms and shared audits, to be implemented. • Prem Sikka is Emeritus Professor of Accounting, University of Essex and a regular contributor to PQ 25

CIMA case study PQ

Put your foot down for Acellerate!

The OCS team at HTFT Partnership have some top advice on how to tackle the Operational Level case study opefully you have booked your OCS exam slot and are now ramping up for the Acellerate case. We would say after the pressures of sitting the Operational Level OT exams (E1, F1 and P1) you may actually find you enjoy the preparation for this case study. The first step is to get very familiar with the pre-seen and with your ‘part’ in this experience: “You are a Finance Officer for Acellerate, a car rental company. Your main role is to support Ethan Tennant, the Finance Manager. Your tasks include preparation of the annual budget, producing the monthly management accounts and providing information to management as required. You also assist with the preparation of the financial statements and deal with any queries regarding financial reporting.”

The exam The case study exam is a computer based exam of three hours (four sections of 45 minutes each) – there is no reading time added. The exam aims to integrate and apply the knowledge tested in the Operational syllabus. The exam is based on: • Pre-seen material (on Acellerate), which is already published on CIMA’s wesbite. • Additional unseen material given to you in the exam room. The answers you give will be long form and typed into the exam system, this will consist of all forms of modern communication, including emails, reports and briefing notes as examples. This case study will require you to PQ Magazine May 2021

demonstrate that you have acquired the knowledge, skills and mindset of the CIMA finance professional, along with an appreciation of the impact of the features of the simulation (the context, organisational structures and environment and ecosystem within which the organisation operates). CIMA Blueprint and assessment Within each Operational case study examination, six core activities will be assessed. These core activities represent the tasks that are most frequent, critical and important to the entry level finance professional role. The six core activities are: A. Prepare costing information for different purposes to meet the needs of management. B. Prepare budget information and assess its use for planning and control purposes. C. Analyse performance using financial and nonfinancial information. D. Apply relevant financial reporting standards and corporate governance, ethical and tax principles. E. Prepare information to support short-term decision-making. F. Prepare information to manage working capital. The core activities are linked to associated assessment outcomes expressed in terms of ‘I Can’ statements that speak directly to the skills and competencies that drive the employability of successful learners. These ‘I Can’ statements can be found in CIMA’s Operational Level Blueprint document.

Writing skills This is the first time you will get to display to CIMA your ability to ‘write’ long form answers at exam standard. You will need to be able to demonstrate that you have acquired the required knowledge, skills, techniques and mindset for that role, with an ability to structure an answer with a ‘logical flow’. Practising answering long form questions based on Acellerate, and how to lay out your answers to maximise marks, is going to be key. If your tutor offers to mark homework take them up on the offer, as getting as much feedback as possible is very important. Acellerate Each exam variant written by CIMA contains a ‘theme’, that is built on and developed through the sections. Each of the four sections comprises sub-tasks. The sections can be focused on one core activity area, but they commonly are a combination of two of the three. Being very familiar with the Acellerate preseen (Acellerate is a leading car rental company based in Everland, in Western Europe) can help you to feel comfortable with the subject matter on the day. But you must answer the question as set on the day not ‘one you did earlier’! You need to be prepared for a ‘curved ball’ variant. Contemplate and research the car rental market and the challenges/opportunities that exist: • Decreasing car ownership rates – move to ‘rent’ your own car out. • Self-driving cars. • Online bookings and customer service. • Competition with the car-sharing industry. …and the impact these could have on Acellerate. An easy exam may seem like a ‘gift’, but you have to outperform other candidates. It can be hard to believe but a tough paper is often easier to pass for a competent student who thinks on their feet, generates ideas and answers all parts of all tasks. • Thanks to the OCS team at HTFT Partnership 27

PQ CIMA case study

Secrets of success Clancy Peiris discovers from top PQs how they passed the CIMA case study

e interviewed our November 2020 Case Study top performers, who were delighted to share some of their secrets for exam success with us. We hope that you will find their insights useful and that they will provide you with practical tips to use during your own exam preparation sessions and Case Study exams.

Find your memory technique Regardless of the topic and exam type, shortterm memory recall is proven to be a key factor in exam success. However, our learning styles are unique so you will need to find a memory technique that works for you. All of our top performers recommended using succinct notes such as bite-sized chunks of imagery or narrative to aid recall. Rachel Knott, who reached the joint-first position in the Strategic Case Study exam, said: “I write down my own notes, make posters and use different colours.” Our Operational Case Study exam top performer, Sanuja Rajasinghe, added: “While self-studying for many of my Objective Test exams, I found it very helpful to write up my own short notes while going through the material. This helped me remember those points during my Objective Test exams, as well as during the Operational Case Study.” The key here is not to think of the compilation of these revision notes as a critical step for success, what’s more important is how it helps you remember and retain information. In other words, simply writing out text will have little benefit. Using succinct notes, spider diagrams, mnemonics, and post-it notes can all aid recall and avoid cognitive overload. Plan your answers You only have a set amount of time to answer each task in the Case Study exam. Therefore, producing answers that score high marks requires careful planning. A CIMA examiner recommends you “take time to plan your answer so that you are able to apply your knowledge to the specifics of the case”. In fact, all of our top performers mentioned that they plan their answers before physically writing them out. Danielle Pye, who reached the joint-first position for the Management Case Study exam, explained: “I read the question carefully and then split my time based on the question weightings.” Why is this a good approach? Well, it helps Danielle deconstruct the exam into manageable pieces and accurately break down the time that she should be spending on each question, ensuring that her answers provide further depth when required. In addition, Sanuja emphasised the importance of structure. He first listed out the key points and then prioritised them. He also used sub-headings, paragraphs and 28

bullet points in his exam answers, so that his answers appeared well signposted and are very easy to mark. This way Sanuja can also easily double-check that he’s clearly made his point and is sensibly answering the exam questions. Develop your exam skills We also asked our top exam performers about how they made sure that their exam skills were on point. All of them highlighted the importance of practising with past exam questions to help refine their exam technique. ‘’Practise, practise, practise past exam tasks. Practising past tasks and then checking against the published answers will help you to understand what the examiner is looking for,” said one examiner in the May–August 2020 examiner’s report. We know that reading notes or listening to audio lectures is relatively easy and comforting, whereas question practice is harder, time-consuming and challenging, so candidates often leave it to the last minute.

However, performing a mock exam significantly improves your chances of exam success so make sure you include it in your revision plan. “Through question practice I improved my time management. I ran out of time during my first mock exam, but I had a few minutes left at the end of the real exam to review my points and correct mistakes,” said Sanuja. The key to question practice is to do a thorough review of what you answered well and what you need to improve once you’re finished. If you’re finding many of your answers are incorrect, don’t be disheartened. Learning from your mistakes is an effective way to improve. Practical application is key We sometimes spot candidates trying to crowbar knowledge into their Case Study exam scripts where it’s not relevant and doesn’t help answer the question. In exam feedback, CIMA examiners regularly emphasise that “demonstrating good technical understanding PQ Magazine May 2021

CIMA case study PQ is not enough on its own to pass”. In short, simply regurgitating theoretical knowledge will not get you very far. To successfully pass your Case Study exams, you must apply this knowledge to the business scenario in front of you, not the one you wish you had, and make sure that you only incorporate relevant information from the exam and pre-seen materials in your answers. Danielle mentioned that she made great use the exam blueprints, which set out in detail what is examinable in each CIMA exam. All exam questions are based on the content of the exam blueprints and helpfully map out the skills and competencies you need to acquire to pass using ‘I can’ statements. They are really useful to identify gaps in your knowledge, what you need to improve and what the examiners expect from candidates in the Case Study exam. Make the most of the pre-seen materials We asked our top performers to share their insights on how to best use the pre-seen materials before the Case Study exams. They all agreed that having a thorough understanding of the pre-seen materials is critical for success. The more immersed into the pre-seen materials they felt, the easier it was for our top performers to use and apply the relevant knowledge in their answers for the Case Study exam. Danielle recommended pretending to

work for the organisation outlined in the preseen. In addition, Rachel suggested writing your answers using the first-person (e.g. use “I/we should” rather than “they should”), so that you can better simulate the level-specific role you are expected to fill in the exam as explained in the exam blueprint. It’s worth remembering that it’s also useful to analyse the industry the organisation operates in as this will help you understand the wider context. This is also supported by our annual examiners’ feedback. They always emphasise that you need to carefully review any financial information provided, and your answers must demonstrate understanding of the financials. For example, if a business has major cashflow issues, any solutions you outline to improve business performance must be mindful of the shortages of funds and sources of finance. To put it a different way, if you are unable to demonstrate your understanding of the pre-seen materials, your answers will look too generic and won’t address the issues presented in the scenario. The examiner will think you’ve simply not read the pre-seen materials and you are unlikely to pass. Focus on wellbeing Finally, we asked our top performers about their approach to wellbeing and how they looked after themselves as the exam approached. A common habit among top performers is

timetabling – in other words creating a study plan they can stick to. Joshua, who reached joint-first position in the Management Case Study exam, told us that he built “a realistic overall schedule for studying; that included time for me to completely shut-down”. All our top performers did incorporate time out from study into their plans and plenty of breaks, during the days they do study, so they have something to look forward to. Allowing for flexibility with timetables is also important. Our top performers designed study plans that allowed them to complete their revision and exam preparation a couple of days ahead of the actual exam day. “I aim not to learn anything new right before the Case Study; I leave one or two contingency days,” said Rachel – taking time to relax and unwind before the big day, rather than trying to learn new topics, will benefit your final exam performance. You should also make sure that you get enough sleep before your exam, it will be vital for effective exam performance. Thank you to our November 2020 Case Study top performers for taking the time to share their insights with us. And to all of our students, best of luck with your CIMA journey! • Clancy Peiris, Senior Learning Development Manager, Association of International Certified Professional Accountants (AICPA & CIMA)

WIN A CIMA OCS EXAM KIT PQ magazine has joined forces with HTFT Partnership to offer you another great giveaway We have three exam kits to giveaway for the latest OCS case study – Acellerate. The fantastic resource offers over 60 tasks and suggested solutions all based on the pre-seen. Remember, this pre-seen covers both the May and August case exams. Send your name and email address to graham@PQmagazine.com. Head up your email ‘HTFT giveaway’ and we will enter you in the draw. Closing date for entries is 1 May 2021. We will announce the winners on Monday 3 May *PQ magazine’s usual terms & conditions apply PQ Magazine May 2021

PQ measuring goodwill Illustration: Let’s take an 80% investment in a subsidiary that cost $200 and where NCI was measured as a proportion of the net assets which were $100. The correct way to calculate goodwill is as follows: $ Controlling interest

200

NCI (as a proportion of net assets) (20% x 100) Less Net assets

(100)

Goodwill attributable to the parent

Where is the

goodwill? Tom Clendon looks at the principle behind goodwill

n the olden days of face-to-face teaching, questions would be shouted out to me by a student with their arm raised up. In this digital age my online students ask me questions by WhatsApp. As keyboard warriors they are much braver – and so in my experiences online teaching creates more engagement rather than less. But I digress. My responses to these WhatsApp questions are sometimes voice notes and sometimes text. This weekend I composed a reply to a cracking question as I wanted to use numbers to help reinforce my point. I often share my answers on my WhatsApp groups, but I thought I would share this one with all PQ readers. The question The question was this: please could you clarify

why when NCI is measured as a proportion of net assets that the goodwill arising is only attributable to the parent company. I know this is true, but I just don’t understand why. Could you please explain? My answer Good question. I love that the questioner wants to really understand the principle behind this. First, let me just reiterate. It is true that when NCI is measured as a proportion of net assets that the goodwill arising is only attributable to the parent company. The significance of this means that the impairment loss on the goodwill will only reduce group retained earnings and none will be charge to the NCI. It also means when we are dealing with group exchange differences on the retranslation of such goodwill, there will also be no impact for NCI. Let me illustrate with numbers to make sure that we all understand why this is the case.

120

However, please consider the following explanation of how that $120 goodwill has arisen. The parent has paid $200 for the controlling interest in the subsidiary. It has paid $200 for an 80% stake in the $100 net assets of the subsidiary. So the parent has paid $200 and in return has only got a share of net assets of $80 (80% x $100). So when we compare what the parent paid ($200) with what the parent has got in return ($80) we see that the premium, the goodwill that it has paid for is $120. This goodwill of $120, ignores the existence of the NCI, and just concentrates on the parent’s perspective. This proves therefore that when NCI is measured at acquisition as a proportion of net assets the goodwill arising is proportional in that it just belongs to the parent and none is attributable to the NCI. (Read that again – read it out loud – it should make sense). Conceptual inconsistency I give you this explanation to give you absolute certainty that when NCI is measured as a proportion of net assets, the goodwill is attributable to the parent only. You can now reflect that this is horribly inconsistent with the way that we account and consolidate all the other assets of the subsidiary as they are cross cast in full and have NCI attributable to them. A final thought. It still remains the case that where NCI is measured at fair value then the goodwill arising will be in full and so any impairment loss or exchange difference on such goodwill does impact the NCI accordingly. • Tom Clendon is an online lecturer teaching SBR. He loves WhatsApp and can be messaged on 07725 350793. See www.tomclendon.co.uk

Award-winning AAT courses and apprenticeships Flexible learning to suit your lifestyle mindful-education.co.uk/students 30

PQ Magazine May 2021

test bank PQ

No limits So you think you know about Limiting Factor Analysis? Here Philip Dunn puts your knowledge to the test Cuecraft Ltd planned the following activity for quarter ended 31 March 2020: Products Budgeted selling price Volume Direct Labour hrs/unit Direct Labour Cost/unit Direct Material Cost/unit

P1 £100 1,200 4 £36 £20

P2 £90 1,000 3.5 £31.50 £18

P3 £80 1.200 3 £27 £13

The Variable overhead recovery rate per standard hour £3. Fixed Costs/ quarter £45,000 The production and sales volumes above are based on maximum

market demand for the products. Early in the first few days of the budget period a machine in the preparation area breaks down and a spare part is not available until the quarter end. This will adversely affect the operating hours by 10%. Q1: How many direct labour hours were required in the original plan? Q2: What would be the revised capacity in direct labour hours? Q3: Determine the contribution per unit of output for P1. Q4: Determine the contribution per unit of output for P2. Q5: Determine the contribution per unit of output for P3. Q6: Determine the contribution per direct labour hour for P1. Q7: Determine the contribution per direct labour hour for P2. Q8: Determine the contribution per direct labour hour for P3. Q9: Rank the products per contribution per the limiting factor. Q10: Based on the ranking how many units of P3 should be produced and sold? Q11: Based on the ranking how many units of P2 should be produced and sold? Q12: Based on the ranking how many units of P1 can be produced and sold? Q13: Determine the profit achievable in the original plan. Q14: Determine the profit achievable in the revised plan. • Dr Philip E Dunn is a freelance author and technical editor for Kaplan and Osborne Books

Answers: Q1 11,900 direct labour hours; Q2 10,710 direct labour hours; Q3 £32; Q4 30; Q5 £31; Q6 £8; Q7 £8.57; Q8 £10.33; Q9 P3 P2 P1; Q10 1,200; Q11 1,000; Q12 903; Q13 £60,600; Q14 £51,096 PQ Magazine May 2021

PQ Back to Basic – WACC

I wish I was studying WACC

Weighted average cost of capital How do you compute a company’s weighted average cost of capital? Sunil Bhandari helps you get your WACC skills ready for your FM and AFM accountancy exams CCA FM and AFM students regularly face questions requiring them to compute the company’s current weighted average cost of capital (WACC). This alone makes it worthy of its place in the PQ magazine ‘Back to Basics’ series of articles and related videos. However, with the advent of the new CBE, ACCA students must now be able to demonstrate their ‘WACC Skills’ using the ACCA’s spreadsheet exam response software. To illustrate how to prepare the calculations, I am using an adapted version of a past ACCA question.

Question – DINLA (ACCA FM March 2016 Adapted) Equity and reserves

$000

Ordinary shares

23,000

Reserves

247,000

5,000

Bank Loan

3,000

6% Bonds

11,000

(Ve + Vp + Vd) Market Values (The V’s) Here is an extract from my ACCA spreadsheet calculations along with the relevant explanations: Market Values $'000

Explanation

391,920

Number of issued shares x Market price per share ($23,000/$0.25 x $4.26)

2,800

Number of issued shares x Market price per share ($5,000/$1 x $0.56)

Vd (Bank Loan)

3,000

Book value is the market value

Vd (Bonds)

10,500

Number of issued '$100' bonds x Bond price ($11,000/$100 x $95.45)

Total

408,220

270,000

19,000 The ordinary shares of Dinla Co are currently trading at $4.26 per share on an ex-dividend basis and have a nominal value of $0.25 per share. Ordinary dividends are expected to grow in the future by 4% per year and a dividend of $0.25 per share has just been paid. The equity beta factor is 1.12. The 5% preference shares have an ex-dividend market value of $0.56 per share and a nominal value of $1.00 per share. These shares are irredeemable. The 6% bonds of Dinla Co are currently trading at $95.45 per bond on an ex-interest basis and will be redeemed at their nominal value of $100 per bond in five years’ time. The bonds have a credit rating of AA and have a credit risk premium of 161 basis points above the risk-free rate. The bank loan has a fixed interest rate of 7% per year. Dinla Co pays corporation tax at a rate of 25%. The risk-free rate is 5.5% and the equity risk premium is 8%. The key to securing full marks in a WACC question, is to adopt a methodical approach that you can follow under the time pressure of the exam. I would recommend a very simple order of attack to get the WACC right every time: 1. Compute the respective market values of each source of finance (Ve, Vp and Vd) and total these up. 32

(Ve x Ke) + (Vp x Kp) + (Vd x Kd(1-t))

$000

Non-current liabilities 5% Preference shares

2. Ascertain each cost of finance (Ke, Kp and Kd(1-t)) and present these as percentages. 3. Find the WACC using the formula:

Cost of Finance (The K’s) Cost of Equity (Ke) We start with the cost of equity (Ke). This can be computed in one of two ways: • Dividend Growth Model/Dividend Valuation Model (DVM) • Capital Asset Pricing Model (CAPM) The DVM uses the following equation: Ke = (Do(1+g)/Po) +g Where: Do = the dividend per share today Do(1+g) = the dividend per share next year g = annual growth rate in the dividend per share Po = the ex-div market price per share For Dinla this spreadsheet presentation would be: Ke

10.10%

(($0.25(1 + 0.04)/4.26) +0.04 then presented as a %

The DVM method is predominantly used in ACCA FM questions and is rarely seen in the ACCA AFM exam. PQ Magazine May 2021

Back to Basic – WACC PQ Turning our attention to CAPM, the equation provided is:

allow me to demonstrate both ways of computing the YTM:

Ke = Rf + e (Rm – Rf)

YTM

14.46

Time

5.5 + 1.12 x (8) the answer is a % value

The values derived from each model will be different, but the CAPM offers the theoretically the better approach. It shows the correct link between the risks faced by the shareholders ( e) and their minimum return (Ke). Cost of Preference Shares (Kp) The DVM is the only technique that applies for this calculation. The formula is: Kp = do/Po Where: do = the constant annual dividend per share Po = the ex-div market price per share Care must be taken when computing the dividend per share. This is a fixed percentage of the nominal value per share. The latter may not always be $1. The spreadsheet presentation will be as follows: Kp

8.93

Bond Pre Tax Cash Flows (per $100 block)

-95.45

YTM via IRR Function

7.11%

Bond Post Tax Cash Flows (per $100 block)

-95.45

Kd(1-t) via IRR Function

5.57%

4.50

104.50

Note: 1) $4.50 = $6 x (1- 0.25) 2) The bond is redeemed at par ($100) 3) IRR function is ‘=IRR(the string of cashflows)enter’ Let’s now look at the approach taken in the AFM exam. This is a twostep method: a) Compute the yield to maturity (YTM) for the bond via either: • Rf + Credit Risk Premium OR • IRR of the pre-tax bond cashflows b) Kd(1-t) = YTM x (1-t) For the sake of this presentation, I have adapted the Dinla question to PQ Magazine May 2021

6.00

106.00

Kd(1-t) Bonds

5.33

7.11% x (1-0.25)

WACC Finally, we are now in a position to calculate the WACC. Let me remind you of the WACC formula stated earlier: (Ve x Ke) + (Vp x Kp) + (Vd x Kd(1-t)) (Ve + Vp + Vd) Market Values Ve

391,920

2,800

Vd (Bank Loan)

3,000

Vd (Bonds)

10,500

Total

408,220

7% x (1-0.25)

Cost of Bonds (Kd(1-t)) Although exam questions can test irredeemable bonds, redeemable bonds are far more likely to be examined in either FM or AFM. More importantly the use of the spreadsheet has made a huge effect (for the better) in the way you calculate this value. It is interesting to note, the method of calculation for FM questions is different to the equivalent approach that AFM candidates need to follow. Paradoxically, the AFM calculations are easier! In the FM constructive response questions, the days of computing the NPV’s at two estimated discount rates for the post tax bond cashflows and then using the IRR interpolation formula to find the cost of debt is now extinct! The same bond cashflows need to be used but laid out as a string of cashflows. Then the spreadsheet ‘IRR function’ does all the hard work for you as shown below: Time

$'000

This calculation is part of FM questions and we have not seen it tested in AFM. Cost of Bank Loan (Kd(1-t)) This is the easiest of the cost of debt calculations and can appear in both FM and AFM exam questions. The number to incorporate into the WACC is the post-tax value of the bank loan’s current interest rate: 5.25

Moving onto step 2, the cost of debt is:

(5% x $1)/$0.56 then presented as a %

Kd(1-t) bank loan

5.50 + 1.61 these are % values

(Note that the credit risk premium is given in basis points (0.01%)) This approach to computing the YTM is very popular in the AFM exam. OR

Where: Rf = Risk free rate e = Equity beta Rm = Return on the market portfolio (Rm – Rf) = Equity risk premium or Market risk premium For Dinla this spreadsheet presentation would be: Ke

7.11

% Ke

14.46

8.93

Kd(1-t) Bank Loan

5.25

Kd(1-t) Bonds

5.33

WACC

14.12

Using CAPM

Using AFM version

Use of the WACC For both FM and AFM students, the WACC can be used as the nominal discount rate in project appraisal, subject to certain strict conditions. Also, in the AFM exam it can appear in business valuation questions. It is used as the cost of capital to discount the company’s future free cash flow (FCFCo). • Sunil Bhandari is an ACCA FM and AFM online tutor with FME Learn Online. See www.SunilBhandari.com To see the video go to https://tinyurl.com/v4s86afu

Accountancy can be simple if you know the basics. PQ magazine has gathered the top tutors in the world to help us help you. Our Back to Basic video series will guide you through some of the fundamental topics of accountancy. For more go to www.pqmagazine.com and click on the video button on the home page 33

PQ CIPFA spotlight

Doing the right thing

Don Peebles explains how the institute’s five fundamental principles on ethical behaviour can help you make the right choices at work ach day we are faced with choices. Ethical principles guide us in making the most effective decisions for us and others in our lives, in both the personal and the professional sense. This is especially true in the finance profession. Public finance professionals are often faced with decisions that will determine how key services will be provided to the most vulnerable. Because of this, we must operate with a high level of professional ethics. Making the right choices is critical for building trust within communities, fighting corruption and ensuring that people have the tools they need to flourish. Ethical dilemmas are not uncommon in the public finance profession. It isn’t always easy to determine which path to take, especially when faced with high levels of stress and pressure to ‘balance the books’. For example, we might face pressure to modify the application of accounting standards or downplay risks to reach desired outcomes. In 2018, CIPFA conducted a survey of UK public sector accountants that delivered some surprising results – more than half of respondents felt they had been under pressure to act in a professionally unethical way at some point during their careers. With so much at stake, we must do our part to make sure that current and future public finance professionals have the tools they need to make ethical decisions with clarity and confidence. In the digital age, we recognise that information is consumed differently. That is why CIPFA has created a new e-learning module. The module is free for CIPFA members and students. It provides a modern understanding of the principles of ethics along with practical insight into how ethics can influence public

finance professionals. The training includes case studies, Q&A, videos and background reading that will provide a thorough understanding of professional ethics. Ethics has always been a primary focus for CIPFA. We were the first professional accounting body to adopt the International Ethical Standards Board of Accounting Code by implementing a Standards of Professional Practice on Ethics in 2018. These standards bring together the five fundamental principles on ethical behaviour – integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. When making decisions that will impact the lives of others, we must always keep these principles in mind. The principles are also crucial for students to learn as they begin their careers. As we move into a post-pandemic world and the recovery process continues, we will be faced with unforeseen

situations that may not have been imaginable a few years ago. A solid understanding of ethics and how this will impact the profession in the future is invaluable for those just entering the workforce and will help them to navigate through challenging future finance decisions. Identifying ethical dilemmas and making the best decisions might not be simple, but having the foundational knowledge to make informed choices is key. As the world changes around us, CIPFA will continue to develop tools to support public finance professionals facing challenging situations. The ethics e-learning module and a library of ethics content for members can be found on the CIPFA website. If you are experiencing an ethical dilemma, the CIPFA ethics sounding board is also available by contacting ethics@cipfa.org. • Don Peebles, CIPFA Head of Policy and Technical

Registered Tuition Provider

PQ Magazine May 2021

ACCA ATX PQ

More discussion, less data overseas PE are sold, this triggers gains on the individual assets. Gains on qualifying assets can usually be deferred using Rollover Relief.

Richard Poole has some top advice on why it’s vital ATX sitters are able to impart some top advice ne of the most important skills in the ACCA ATX paper is to be able to give advice as opposed to just being able to learn and regurgitate tax rules. Knowing the tax rules is important, but being able to add value, by advising properly, is key to getting a high score in ATX. Having taught ATX for many years I see the areas that students regularly struggle with, so I will explain these areas (and the related tax planning advice) in this and future editions of PQ. The following two areas were tested in part (b) of the Spetz Ltd Group question in the December 2013 exam. These areas are easy to include in any corporate question in the ATX exam, so are well worth being prepared for.

1) Residence status of a UK company A company is regarded as UK resident if: • It is incorporated in the UK, or • Its central management and control is exercised from the UK. Central management and control of a company is usually regarded as being exercised in the place where the key operational and financial decisions are made. If a company is UK resident it is subject to Corporation Tax on its worldwide income and gains. This includes overseas incomes and gains, so to avoid being taxed twice, double tax relief is available in the UK Corporation Tax Computation at the lower of UK tax and overseas tax. 2) Overseas Permanent Establishment versus Overseas Subsidiary If a UK Company is planning to expand overseas, it has two choices: a) Expand using an overseas permanent PQ Magazine May 2021

establishment (PE), or b) Expand using an overseas subsidiary (Sub). The differences between these choices are important to understand from a tax point of view. There are seven main issues that I will address in relation to each choice. Expand using an Overseas Permanent Establishment (PE) A common error that students make when explaining this area is to talk about a permanent establishment as if it is an overseas company – it is not! It is effectively an extension of the UK parent company. Here are the tax implications:i) Profits of the PE – these are taxed with the profits of the UK Parent Company. ii) Double Tax Relief – the lower of (i) the overseas tax on the PE profits and (ii) the UK tax on the PE profits is allowed as a deduction in the UK to avoid double tax. iii) Capital Allowances – tax relief on plant and machinery bought for the overseas PE are available. iv) Relief for losses – losses made in the overseas PE can be used against the UK companies and other UK Group members’ profits. v) Gains Group – the overseas PE is part of the UK Gains Group (due to its association with the UK company) so there are no gains or losses when assets are transferred. vi) 51% group company – an overseas PE is not a 51% company. It is therefore less likely that the UK parent company pays Corporation Tax by instalment. vii) Treatment on Sale – when the assets of the

Expand using an Overseas Subsidiary (Sub) The overseas subsidiary is a separate company (Unlike the overseas PE), so the tax implications are different: i) Profits – as long as the Sub is non-UK resident, the profits are not taxed in the UK. Also, dividends paid to the UK parent are tax free in the UK. ii) Double Tax Relief – there is no need to consider Double Tax Relief as overseas profits are not taxed in the UK. iii) Capital Allowances – generally are not available on plant and machinery purchases made by the Sub. iv) Relief for losses – relief is sometimes possible. However, for ATX, we say that overseas losses cannot be given to the UK company. v) Gains Group – overseas Subs are not included in the UK gains group, so assets would be transferred at market value and this triggers gains. vi) 51% group company – the Sub will create an extra 51% company, so it is more likely that the UK parent company pays Corporation Tax by instalment. vii) Treatment on sale – a gain will occur in the UK parent on the sale of shares of the Sub. This may be exempted using Substantial Shareholding Exemption (SSE). Giving advice It is important to be able to take the facts above and to give some advice. When UK companies expand overseas, they often make losses initially. Once they are established, they hope to make profits. Good planning advice is to: • Initially set up as a permanent establishment, so that any losses made by the overseas PE can be used be the UK parent company to reduce their profit, then... • Incorporate the overseas PE into an overseas Sub meaning that the overseas subsidiary can send profits back to the UK (as a dividend) and dividends are not taxable in the UK. There are implications regarding gains when an overseas PE is incorporated into an overseas Sub (which I am not going to address in this article), so another option is to ‘Elect to exempt the overseas PE profits’. This is an irrevocable election, and it is applied to all current and future overseas PEs. If the election is made: • UK relief is not allowed on overseas PE losses. • No capital allowances can be claimed on overseas PE plant and machinery purchases. This election will be worthwhile if the overseas PE is profit making and is unlikely to make future losses. • Richard Poole is an ACCA ATX tutor at FME Learn Online 35

PQ study advice

Together we’re stronger… Erin Morton charts the rise of the ‘study buddy’, and explains how you can benefit by getting one

ork, study, rest, repeat. Sound familiar? For many this has been a reality, with little else, for the past year. Studying for a professional exam can feel like this at the best of times. However, for many of us, each part of our lives has been pushed to the confines of our home, with digital tools being our only contact with the outside world. Maybe you have realised that there are so many everyday things that had been taken for granted before. One thing that may have gone unappreciated, until now, is the power of having someone to talk to. Especially when things get tough. Maybe having someone around who has been, or is currently, following your path. When we are at school we are surrounded by fellow students. This community of learners bounce ideas from each other. They learn, not just from the teacher, but from everyone around them. When we are at work, for example, in the office, the same thing happens. We can learn from those leading the team, but we also learn from our colleagues and we all support each other. When studying for a professional qualification it can be lonely. Self-doubt is always creeping in, trying to trick us into giving up. Selfdoubt tells us we are not good

enough, and that we do not have enough time to succeed. There is great benefit in creating some personal support to your

learning strategy and fight back from self-doubt. And so, comes the rise of the ‘study buddy’. This is not a new phenomenon.

However, as many of us have lived our lives so remotely it has a new-found importance. Finding someone or a group of people who are studying towards the same goal, the next exam, is really benefiting many students. It encourages happiness and success. The study buddy can take many shapes: • They can be a friend at work who is studying at the same pace, or someone your met in the classroom environment. • A modern support is social media and meeting people remotely. There are many forums on social media that support students. They allow you to share information and find people walking in your shoes. • There are also tutors who support you along the way, sharing information and advice from when they walked in your shoes. • And there are also tutors and providers, such as myself, that use digital tools to set up study groups for each cohort, giving you the chance to share information with each other. Studying does not have to be ALL hard work. There is not a special prize for the student that did it all on their own with no support. Learning can and should be fun. It is an opportunity to grow, make friends and create positive memories, as you make your journey to becoming a qualified accountant. I am still friends with many of my study buddies after all these years. We are dotted all over the world thanks to the platform our qualifications gave us. Each of us relied on one another at some point during our studies. Play to your strengths and learn from others. • Erin Morton is the ACCA AA tutor with FME Learn Online. See www.erinmorton.co.uk

PQ Magazine May 2021

profile PQ

Why remote learning works Katie Locke’s AAT studies have helped her gain a career in a City accounts team. Here she explains why flexible distance learning was ideal for her – and why she dreams of becoming a forensic accountant

remote learning with AAT would reflect these difficulties and doubts about my capabilities despite all of the fantastic referrals from alumni students. Well, I couldn’t have been more wrong! I have regained confidence in myself and the decisions I make, that I thought was lost forever, and I feel less demoralised at any setbacks I may face. The sense of achievement I feel from learning each new topic is an unrivalled feeling. To know that this is the product of my own hard work is amazing!”

Studying at my own pace “Having graduated university and facing a highly competitive job market, it was apparent I could not commit to the rigid structure of classroom learning and be able to work a job to support myself financially. By studying with Premier Training at home, in my own time, I was able to complete my AAT Level 2 Foundation Certificate in Accounting at my own pace, around working a demanding full-time job and gain that critical industry experience because of it.”

time. The thought of learning remotely after growing up learning in classrooms, was daunting; but having a kind, supportive remote tutor to bounce ideas off of, have a moan to or just to muddle through a study problem with, made all those worries disappear!”

Great tutor support “Knowing I still had a great personal tutor only a call or email away at any time was a great comfort in the absence of physical classroom

Sense of achievement “I had a hard time at university, the delivery of the course was not suited to my learning style. For this reason, I was extremely worried that

Making a difference “I currently work within an accounts team in the City – something I wouldn’t have been able to achieve if it wasn’t for my ambition to study with AAT (it was even in the job application!). I intend to continue studying with Premier Training through the next levels of AAT, gaining more industry experience as I go, one day to hopefully work towards becoming a forensic accountant and fulfilling all my puzzle-solving dreams and making a difference within the industry.” • Having recently completed the Level 2 Foundation Certificate in Accounting, Katie has already enrolled onto the Level 3 qualification.

PQ Magazine May 2021

PQ wellbeing

The power of the ‘brain dump’ Dump all your stressors on paper – you’ll feel a whole load better for it, says Pantelis Fouli

etting used to the new normal can be challenging. Growing up in the 1980s and 90s I was told by my parents whenever I hit a roadblock and felt the stressors of life to “tough it out” and get on with it. It didn’t do me no harm, they did the best they could and I came out ok. Having said that, times have changed and the new normal does add pressure on adults and children alike. I would like to share a technique I use when life seems to get the best of me (which is most days!). It’s called a ‘brain dump’.

What is a brain dump? A brain dump is simply the act of dumping all the contents of your mind onto paper, as one might dump the contents of a purse onto a table. You are spilling out stressors, your nagging thoughts, your pesky annoyances. In other words, the brain dump is a process where you allow all the cluttered thoughts in your brain to be written down on paper – to get it out of your head and in some type of tangible form that can later be tackled as a task list. Your brain is a junk drawer You know when you’re on a house cleaning rampage and you get to that one drawer in the kitchen. The junk drawer. The one drawer filled with crap that doesn’t have a home and you’re often afraid to even open it because you know stuff will start spilling out of it. You think about cleaning it but put it off until next time. Again. And again. And again. Then one day you get brave (or fed up) and decide to pull the whole damn drawer out of the cabinet and just dump it upside down and all that clutter is in a big pile on the floor. You can’t even begin to start cleaning and organizing that drawer until you first dump it all out and get it all out into the open. There’s so much miscellaneous stuff that’s been hiding in the crevices for years. You can’t sort and clean what you can’t see. The only way to get through all that mess is to first figure out what’s there and sort it all out. Then you’re able to throw out the stuff that’s junk and organise the stuff you need to keep. Maybe there is a pile of stuff that needs to go somewhere else, some stuff that needs action, some stuff needs to be catalogued and organised – each of those things needs to be sorted into different piles. Once the big messy pile of junk is sorted into piles, you start to take action on each of those piles. Throw out the garbage. Take action on the things that need immediate attention. Store the rest in neat and orderly bins so you can find what you’re looking for next time you need to find it. It takes some work and some time, but once your junk drawer is clean and organised, it works so much better. Now replace junk drawer with your brain. Replace junk with thoughts, tasks, errands, 38

worries, projects, etc. David Allen, the author of Getting Things Done, reminds us that “Our brain is a thinking tool, not a storage device.” The human mind is terrible at storage. In fact, there are estimates from various scientific studies that the suggests the average adult has anywhere between 20,000 and 70,000 thoughts per day. What? No way can I keep track of all that! What is the purpose of brain dumping? A brain dump is a simple technique to help you declutter your mind and thoughts. It helps you gain focus on things that need doing. Brain dumping also helps you organise your time and efforts. Meaning you usually are much more productive and calmer, too. What do you write in a brain dump? I just grab my notebook and a pen and just start writing, whatever I need to get out of my system. Below you can see a few prompts I may use to get me going: • What have you been worried about? • What do you keep forgetting to do? • What would make you really happy? • Did something go wrong with your day/week? • What really worked today/this week? • What tasks never seem to get done? • Was there something you didn’t get time to do? • Is there an upcoming event or special occasion? • Are there maintenance tasks you keep

meaning to do around the home, for the car or other areas? • Is there someone you keep meaning to contact? Or an act of kindness you would love to do for someone special? • Are there any big goals you keep putting off that would make a big difference to your life? Maybe you want to take up yoga, start a new fitness routine or lose a few pounds. • Is there something you would love to learn? • Is there part of your routine that really isn’t working? • Is there part of your home that needs rearranging or redecorating? • Do you need to plan a vacation, party or other exciting events? • Is someone or something annoying you? This is a big one for me. To finish off here, I would like to take it one step further. I make sure I come back to my list in the evening. The evening review is so important because only after you have put your stressors on paper, and a good six-12 hours have elapsed, you are able to step aside and detach from all those nagging thoughts. In most cases you’ll find that you may have been overreacting initially and that by putting them on paper, plus the passage of time, has enabled you to change perspective. Do not ignore this last part, which for me is what makes it such a powerful mental tool. Try it. Till next month. • Pantelis C. Fouli is ACCA qualified and an ACCA Advocate and student mentor. Connect with him via LinkedIn (https://www.linkedin. com/in/pantelisfouli), but please mention in the personal message that you are PQ reader PQ Magazine May 2021

careers PQ

Dear Karen Ask PQ’s agony aunt Karen Young when you need expert advice. Email your dilemma to graham@pqmagazine.com, and he will pass on the best ones to Karen THE DILEMMA My office has reopened now restrictions have lifted. I’ve enjoyed working from home and I’m anxious about what to expect – can you offer any reassurance?

KAREN’S RESPONSE It’s completely normal to feel anxious about a return to the office – whether that be because you have concerns about Covid-19 or if you are worried about other aspects of office life. Most of us have had limited social contact throughout this pandemic, so add in that familiar ‘return to the office’ apprehension we used to feel after a holiday, with the added stress of commuting, it’s not surprising you may have concerns. All workplaces must be certified Covid-19 secure, and hopefully your employer has put together a robust plan for how staff can return in a sensible manner. For example, social distancing will be in place, so you won’t be sat as close to your colleagues and your employer may implement staggered start and finish times. Share how you are feeling with your line manager or colleagues. They are probably having similar feelings. If you don’t want to return at all, or if you want to discuss how you could work flexibly, ask for a discussion with your manager. Most organisations have now seen the benefits of allowing remote working, and it’s likely many will move to a hybrid working model going forward. • Karen Young is a director at Hays. She is passionate about helping people to find the right job, and companies to find the right person

PQ Magazine May 2021

Life at Westminster Prem Sikka is a member of the House of Lords and Emeritus Professor of Accounting at the University of Essex. He describes himself as “semi-retired, and work for whatever grabs my interest”. He has been an ACCA member since 1977 and writes regularly for PQ What time does your alarm go off? Most days I wake up around 6.30–7am – without alarm. What is on your desk? Copies of government bills and related research, numerous letters from groups and individuals lobbying me, and a West Ham calendar. How long is your commute to that desk and is it better now? Since the lockdown I have worked from home which is convenient but makes networking very difficult. Do you have a favourite lunch? Minestrone soup and a cheese and tomato sandwich. What can you see when you sit at your desk? I am facing a shelf full of books on philosophy, politics, sociology and economics. However, behind me is my garden, which always has a calming effect. Which websites are your favourites during lockdown? I regularly visit a variety of news sites. I also like websites that provide historical background to understanding contemporary events. How many hours a week are spent on Zoom (or in other online meeting rooms)? During lockdown I have lost count of the number of online meetings and seminars I’ve had. Today I had my

first meeting of the day at 8.30am with a group seeking to end discrimination against women. Are you spending more time working now than normal? Definitely, as I meet more people who are unwitting casualties of our social system. How do you relax? Watching older (1960s and 1970s) Bollywood movies on YouTube, walking, admiring nature and enjoying company of family and friends. What is your favourite tipple? Alcohol consumption is rare. Tea, fruit juice and soft drinks are my favourites. What’s your favourite TV show? Fawlty Towers, for making me laugh. What is the best film you have watched recently? ‘Hidden Figures’, which is a celebration of the life of ordinary people who changed the world. Summer or winter? Summer. You can’t beat a stroll in the park on a

warm day, seeing people enjoying themselves, listening to birds singing and admiring the abundant gifts from mother nature. Think back do you prefer pubs or clubs? In my youth, in the era of long hair and flared trousers, I frequented many pubs and clubs. Nowadays, I’m more likely to prefer a café or a restaurant. Do you have a hero? It’s hard to single out one person. I admire people who against all the odds changed life for the better. What is the first thing you are going to do when lockdown is over? Hug my children, other members of my family and friends who I have not met for some time. If you had a time machine where would you go? I would like to go back to 1966 when I waved goodbye to my grandad at Delhi airport and never met him again. If only I could spend a little more time with him.

The PQ Book Club: books you should read Transitioning To Visual and Hybrid Events, by Ben Chodor with Gabriella Cyranski (Wiley, £20) The author of this book, Ben Chodor, hopes we will remember 2020 as the year that “brought the need for effectively and efficiently connecting people into sharp focus”. Companies out of necessity around the world have now changed their in-person event strategies and shifted to virtual and hybrid events. However, many will have discovered creating engaging virtual events is not as simple as moving the same content online! Chodor believes you need to dress for on-camera success. What you wear matters as much as the content you are

preparing. But remember the camera reacts differently to certain colours and patterns. He says that blues and other cool colour tones enhance presenters on camera. Oh, and long hair can interfere with the microphone and cause unwanted noise. He is also suggesting foundation makeup as it “helps both men and women avoid looking too shiny and washed out”. Finally, you don’t want a Moire effect, either! Apparently, patterned shirts (polka dots) can interference with the camera and create ripples on screen. Chodor also covers the whole area of marketing virtual events too. It’s all pretty standard stuff, but it’s nice to see it all written down. Thanking people

for attending is key, right down to those who asked questions or shared insights. Connecting with people on LinkedIn afterwards is a good tip for those running the event and those attending! He also looks into the future and augmented reality, which takes things further than merely integrating a live feed into a virtual environment, and introduces computer-generated senses like sound, sight, touch and smell. PQ rating 4/5: A nice easy read, and a tome that should be seen behind you on your bookshelf for your next Zoom! 39

PQ got a story, funny or serious, you want to share? Email graham@pqmagazine.com

Celebrating Turing

The new £50 note, featuring computer pioneer and code breaker Alan Turing has been unveiled by Governor of the Bank of England, Andrew Bailey. The polymer banknote will enter circulation on 23 June, to coincide with what would have been the mathematician’s 109th birthday. Like the £20, the new note incorporates two windows and a two-colour foil, making it very difficult to counterfeit. There is also a hologram image which changes between the words ‘Fifty’ and ‘Pounds’ when tilting the note from side to side. Bailey said: “There’s something of the character of a nation in its money, and we are right to consider and celebrate the people on our banknotes. So I’m delighted that our new £50 features one of Britain’s most important scientists, Alan Turing. Turing is best known for his codebreaking work at Bletchley Park, which helped end the Second World War. However, in addition he was a leading mathematician, developmental biologist, and a pioneer in the field of computer science. He was also gay, and was treated appallingly as a result. By placing him on our new polymer £50 banknote, we are celebrating his achievements, and the values he symbolises”.

VW jumps the gun with April Fool

Buy a car with Bitcoin Telsa has told customers that they can buy their cars with bitcoin. Company chief Elon Musk told the world via Twitter, helping bitcoin to another record high. Musk explained that Telsa will run its own software to handle payments via the cryptocurrency. He also promised: “Bitcoin paid to Tesla will be retained as bitcoin, not converted to fiat (government-controlled) currency.” Bitcoin’s volatile price means its use to buy real-world goods is not straightforward. To this end, Tesla has said if a refund is needed it can pay in either the exact amount of Bitcoin paid or in US dollars based on the dollar price of the car – whatever suits. So, if the price of bitcoin goes up before a refund is issued, the customer could lose out.

’ WEV E

All its plans were in place and the press release was ready. The German car maker Volkswagen was going to announce it was changing its name to ‘Voltswagen’ in the US. Then someone hit the send button, and the ‘April Fool’ started to get media attention - but three days too early! The press release explained that US boss Scott Keogh was backing VW’s move to electric cars with a rebrand – replacing the ‘K’ with a ‘T’. The US website changed its name and a new twitter account was launched. Unfortunately, the joke didn’t hit any funny bones, particularly with investors. Remember, this is a company still recovering from the ‘dieselgate’ scandal. There are even calls for the regulator to be involved.

Watch out for rainbows

Lockdown-busting London party Two EY partners could be in for a roasting, because the story of their Christmas Party just won’t go away. Some 25 staff members of EY’s international tax division reportedly gathered at top London restaurant Roast for a dinner on 11 December. Spread over five tables, they had difficulty keeping to the social distancing rules, and restaurant staff had to intervene at one point. EY has confirmed it has investigated the allegations but has not made it clear if anyone has been disciplined. The story has been picked up by Private Eye, so it’s not going away.

How do you combat ‘Zoom fatigue’? Well, KPMG is now testing a ‘rainbow meeting system’. This will tell staff, using colours, if they have to be at their screen to take a meeting or whether it could be done while out on a walk. The Big 4 firm explained that it is piloting the system to help employees to take more regular breaks and avoid those back-to-back virtual meeting which keep you stuck to your desk. Research by University College London (of 70,000 people) has found 34% of adults have put in longer hours working from home during the second lockdown when compared to the first lockdown, and two-fifth have exercised less.

GOT THE L OT

The Great Wave Katsushika Hokusai was a celebrated Japanese artist of traditional woodblock techniques. Who doesn’t know his striking image of the great wave, struggling fishermen and the distant majesty of Mount Fuji? Well, we have a 1,000-piece jigsaw puzzle of The Great Wave to give away this month To be in with a chance of winning this great puzzle simply send your name and address to giveaways@pqmagazine.com. Head up your email ‘The Great Wave’ and we will do the rest.

Logical puzzles for you We have three copies of ‘The i Book of Logic puzzles’ to give away this month. Featuring 100 brand new puzzles, this collection has been especially curated by the team that bring you the i newspaper puzzle pages. Designed for all fans of logical puzzles, this book will take you away from the stress of exams and study. You will be pleased to know that unlike accountancy exams the solutions can be found in the back of the book! To enter this great giveaway send your name and address to giveaways @ pqmagazine.com. Head up your email ‘Book of Logic’ and we will put you name into the hat for the draw for one of the three books up for grabs.

Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 14 May. The main draw will take place on Monday 17 May 2021.

TO ENTER THESE GIVEAWAYS EMAIL GIVEAWAYS@PQMAGAZINE.COM 40

PQ Magazine May 2021